Edited version of private advice

Authorisation Number: 1052378111745

Date of advice: 04 April 2025

Ruling

Subject: Insolvency

Question 1

Are the current administrators of the companies listed in this ruling entitled to claim input tax credits which are owed to those companies as a result of payments made by the previous administrators after their date of cessation in discharging the listed companies' liabilities incurred during the period of their appointment?

Answer 1

No.

This ruling applies for the following periods:

After 2000

The scheme commenced on:

After 2000

Relevant facts and circumstances

• Company A, B, C, and D (the listed companies), through Person G and H (you or the current administrators), sought a GST private ruling.
• Company A, B, C and D went into administration due to an accident.
• On Date A, Person E and F (the previous administrators) were appointed as administrators over the listed companies.
• You on Date B, were appointed as a special purpose administrator with limited powers.
• On Date C. the former administrators retired and you became the new general administrators.
• You advised in your private ruling request that the former administrators lodged GST returns for the tax period A but the Business Activity Statement (BAS) was rejected because the former administrators' Client Account (CAC) was closed following the conclusion of their appointment on Date C. As a result, the former administrators are unable to lodge BAS for payments made after Date C.
• Various liabilities incurred by the Companies during the former administrators' appointment (i.e. prior to Date C), are creditable acquisitions under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), were subsequently paid by the former administrators after this date.
• The payments were made by the former administrators from the listed companies' funds retained by them to ensure the liabilities were discharged (thus the former administrators would not be personally liable under section 443A of the Corp Act.
• In the case of each payment, the former administrators obtained confirmation from the current administrators that they had no issue with the payment being made.
• Both the former administrators and the current administrators were/are respectively registered for GST on a cash basis.
• Below is a summary of liabilities paid by the former administrators after Date C, for which GST refunds currently have not been claimed by either the former or current administrators. Copies of relevant invoices and payment statements were provided.

Table summary: the payments were paid on dates after Date C, and were made in the name of Company A in various amounts.

• Additionally you provided a table of payments to be made by the former administrators which are liabilities incurred by the listed companies during the period of the former administrators' appointment which the former administrators will seek to pay from those companies' funds they retain. You provided invoices for all listed expenditure with the exception of the former administrators' fees to Date C which have been incurred but not yet invoiced.

[Table redacted].

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 58-10,

A New Tax System (Goods and Services Tax) Act 1999 section 58-20,

A New Tax System (Goods and Services Tax) Act 1999 section 195-1,

Corporations Act 2001 Division 2, Part 5.3A and

Corporations Act 2001 section 9.

Reasons for decision

Question

Are the current administrators of the companies listed in this ruling entitled to claim input tax credits which are owed to those companies as a result of payments made by the previous administrators after their date of cessation in discharging the listed companies' liabilities incurred during the period of their appointment?

Summary

The current administrator has entitlements to ITCs as a 'representative' under section 58-10. However, the current administrator is not able to claim any input tax credits as it has not made any acquisitions, within the scope of its responsibility or authority for managing the companies listed above.

Detailed reasoning

Division 58 of the GST Act sets out how to ascribe activities of a representative of an incapacitated entity between the representative and the incapacitated entity for GST purposes.

Division 58 is not drafted to apply to delineating between the former administrator and the current administrator. It applies between you as the current administrator and the incapacitated entities, being the listed companies above. It is a reasonable conclusion that it operates the same way between the former administrator and the incapacitated entities.

The primary issue is whether you have an entitlement to input tax credits in the context that the previous administrators acted under Division 58 for the listed companies until the date they ceased to be the representatives of the listed companies on Date C.

The previous administrators made the acquisitions which in the facts are in two categories:

1.Paid but not claimed; and

2.Incurred but not paid (but sufficient funds are held to pay those amounts)

Section 58-10 sets out 'circumstances in which representatives have GST-related liabilities and entitlements'.

As stated above, this provision only applies between you and the incapacitated entities for whom you represent. It states:

General rule

(1) A *representative of an *incapacitated entity:

(a) is liable to pay any GST that the incapacitated entity would, but for this section . . . be liable to pay on a *taxable supply or *taxable importation; and

(b) is entitled to any input tax credit that the incapacitated entity would, but for this section . . . be entitled to for a *creditable acquisition or a *creditable importation; and

(c) has any *adjustment that the incapacitated entity would, but for this section . . . have;

to the extent that the making of the supply, importation or acquisition to which the GST, input tax credit or adjustment relates is within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs.

Exceptions for certain taxable supplies

(2) This section does not apply to the GST payable on a *taxable supply to the extent that one or more of the following apply:

(a) the *incapacitated entity received the *consideration for the supply before the *representative became a representative of the incapacitated entity;

. . .

Exception for certain creditable acquisitions

(3) This section does not apply to an input tax credit for a *creditable acquisition to the extent that the *incapacitated entity provided the *consideration for the acquisition before the *representative became a representative of the incapacitated entity.

. . .

(5) An incapacitated entity . . .:

(a) is not liable to pay GST on a *taxable supply or a *taxable importation to the extent that a *representative of the incapacitated entity is liable under this section to pay the GST on the supply or importation; and

(b) is not entitled to the input tax credit for a *creditable acquisition or *creditable importation to the extent that a representative of the incapacitated entity is entitled under this section to the input tax credit on the supply or importation

From this we can determine that a representative has an entitlement to an input tax credit or a GST liability only to the extent that the making of the supply, importation or acquisition to which the GST, input tax credit or adjustment relates is within the scope of your responsibility as the representative or authority for managing the incapacitated entity's affairs.

Your appointment commenced Date C and your authority commenced on that date pursuant to a court order. The amounts you listed in either payment class are not within your responsibility or authority as they occurred prior to your appointment as a general administrator and they are acquisitions that you did not make.

In Richard Albarran, Brent Kijurina and Cameron Shaw as Joint Administrators of Cooper & Oxley Builders Pty Ltd as trustee for the Cooper & Oxley Builders Unit Trust and Commissioner of Taxation (Taxation) [2020] AATA 4325 (30 October 2020) (Albarran), Senior Member Olding considered the appropriate interpretation of section 58-10 in circumstances where there were competing claims for an input tax credit between an administrator an incapacitated entity.

Two opposing interpretations of section 58-10 were put to the AAT. The administrator argued that in their interpretation of section 58-10 it invoked a two-step approach (at paragraph 24):

(a)   First - What ITCs of the incapacitated entity are attributable to a tax period applying to the representative (which turns on whether the representative accounts for GST on a cash or an accruals basis)?

(b)   Second - Whether the making of the acquisition to which that ITC relates is (not was) within the scope of the representative's responsibility or authority - that is, whether it is an action of a kind that the representative is authorised to make or responsible for making, as an aspect of managing the incapacitated entity's affairs?

[Footnotes omitted].

The alternative construction of the Commissioner is set out at paragraph 25 being:

the making of the supply, importation or acquisition is within the scope of the representative's appointment means that section 58-10(1) may only apply if the supply, importation or acquisition is made during the period of the appointment.

SM Olding took the view that a simpler interpretation is best at paragraph 30:

Perhaps the ordinary meaning of language is in the eye of the beholder. For my part, the ordinary meaning of section 58-10(1) requires that it is the Administrator that makes the acquisition (or supply or importation, as the case may be). That construction in my view conforms comfortably with the statutory language requiring that the making of the acquisition (or supply or importation) is within the scope of the representative's responsibility or authority.

Applying this to your situation, you did not make the acquisitions set out in the facts in either class. As a matter of practice, you are not bound by contractual arrangements you did not enter. We consider that if you did not make the acquisition during the term of your appointment you do not have the entitlement to input tax credits. This conclusion would also be equally true of a GST liability on a supply under paragraph 58-10(1)(a).

During the period from Date B to Date C, the former administrators were continuing their role. At this time you were a 'special administrator'. Your role was limited to the investigation and activities set out in the orders. Your activities were limited to activities principally focused around the accident and potential litigation.

Your acquisitions under the authority extended to you as a special administrator during this period were not specified as part of any of the amounts in the two classes set out above. To the extent that you made acquisitions under the scope of your authority in this period any input tax credits available should be open to you to claim.

Conclusion

Division 58 is applicable to both you and the previous administrator. The test for whether you are entitled to particular input tax credits is determined by whether you actually made the acquisitions. These must be made within the scope of your authority. The acquisitions you outlined were not made by you and are not open to you to claim as they are made by another representative.