ATO Interpretative Decision
ATO ID 2012/7
Goods and Services Tax
GST and liability for a supply made by an incapacitated entity prior to the appointment of a representativeFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a representative of an incapacitated entity, liable for GST under section 58-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives consideration for a supply that was made by the incapacitated entity prior to its appointment?
Decision
No, the representative of the incapacitated entity is not liable for GST under section 58-10 of the GST Act when it receives consideration for a supply that was made by the incapacitated entity prior to the appointment of the representative. (It is the incapacitated entity that is liable for GST, under section 9-40 of the GST Act.)
Facts
The incapacitated entity is registered for GST.
The representative of the incapacitated entity is registered for GST.
The incapacitated entity made a taxable supply under section 9-5 of the GST Act prior to the appointment of the representative.
While appointed, the representative receives all of the consideration for the taxable supply made by the incapacitated entity prior to the appointment.
Reasons for Decision
Under subsection 58-10(1) of the GST Act, a representative of an incapacitated entity is liable to pay any GST that the incapacitated entity would, but for section 58-10 or section 48-40, be liable to pay on a taxable supply to the extent that the making of the supply is within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs.
Paragraph 58-10(2)(a) of the GST Act provides an exception to the general rule in subsection 58-10(1) of the GST Act. Under paragraph 58-10(2)(a), the representative of an incapacitated entity is not liable for any GST amounts to the extent that the consideration for a taxable supply was received before the representative became a representative of the incapacitated entity . This exception does not apply as the incapacitated entity did not receive any consideration for the supply prior to the appointment of the representative.
The facts state that the incapacitated entity made the taxable supply prior to the appointment of the representative. As the supply was made by the incapacitated entity prior to the appointment of the representative, the making of the supply clearly did not fall within the representative's responsibility or authority for managing the incapacitated entity's affairs, at the time the supply was made.
The mere subsequent receipt by the representative of the consideration for the supply that was made by the incapacitated entity before the appointment of the representative does not have the effect of bringing the 'making' of the supply within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs.
Accordingly, because the supply is not within the scope of authority of the representative, the representative is not liable for the GST on the taxable supply under subsection 58-10(1) of the GST Act, despite the fact that the representative receives all of the consideration for the supply.
Instead, the incapacitated entity is liable for GST, under section 9-40 of the GST Act.
Notes:
- 1.
- This ATO ID replaces ATO ID 2002/86 which dealt with former Division 147 of the GST Act, which was repealed with effect from 4 December 2009.
- 2.
- In accordance with section 58-60 of the GST Act, if the representative is a representative of a kind that has the capacity to declare dividends to unsecured creditors of the incapacitated entity, the representative may be required to notify the Commissioner of an amount of GST for which the incapacitated entity is liable.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
section 9-40
subsection 58-10(1)
subparagraph 58-10(2)(a)
ATO ID 2002/86
Keywords
Goods and services tax
GST special rules
Representative of incapacitated entities
GST supplies & acquisitions
Taxable supply
ISSN: 1445-2782