Case: Commissioner of Taxation v Reliance Carpet Co Pty Ltd [2008] HCA 22 ; (2008) 82 ALJR 968
Outcome: cited
A description, which I gratefully adopt, of the general scheme of the GST Act in respect of liability to GST and a summary of some presently pertinent provisions is to be found in the recent judgement of the High Court in Commissioner of Taxation v Reliance Carpet Co Pty Ltd [2008] HCA 22 ; (2008) 82 ALJR 968 at 970-971, [3] to [9]: The GST 3 Provision respecting the assessment and payment of the GST is made by the statute styled A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("the Act "). An important point respecting the nature of the GST was made as follows by the Full Court of the Federal Court in Sterling Guardian Pty Ltd v Commissioner of Taxation: [2006] FCAFC 12 ; (2006) 149 FCR 255 at 258: "In economic terms it may be correct to call the GST a consumption tax, because the effective burden falls on the ultimate consumer. But as a matter of legal analysis what is taxed, that is to say what generates the tax liability (and the obligations of recording and reporting), is not consumption but a particular form of transaction, namely supply ..." By way of contrast to the Australian system, counsel for the Commissioner referred to Art 2(1) of the first Council directive [Directive 67/227] on the harmonisation of legislation of member states of the European Community concerning turnover taxes; this indicates that VAT is a general tax on the consumption of goods and services. 4 Section 7-1 of the Act relevantly states that GST is payable on "*taxable supplies" [The use of the asterisk is a device to alert the reader to the presence of a definition in the Dictionary to the Act ]. Section 9-5 answers a question "what are taxable supplies?", posed by a hypothetical taxpayer, by stating that "you make a taxable supply " if, among other criteria not presently relevant, "you make the supply for *consideration". 5 The composite expression "a taxable supply" is of critical importance for the creation of liability to GST . In the facts and circumstances of a given case there may be disclosed consecutive acts each of which answers the statutory description of "supply", but upon examination it may appear that there is no more than one "taxable supply". 6 The meaning of "supply" is given in s 9-10 and in addition to the general words "any form of supply" in s 9-10(1), par (d) of s 9-10(2) includes "a grant, assignment or surrender of *real property", and "real property" is defined [In the Dictionary provision of s 195 -1].expansively as including: (a) any interest in or right over land; or (b) a personal right to call for or be granted any interest in or right over land; or (c) a licence to occupy land or any other contractual right exercisable over or in relation to land". Further, par (g) of s 9-10(2) includes "an entry into ... an obligation ... to do anything. 7 The term "consideration" is defined in par (a) of s 9-15(1) as including: "any payment, or any act or forbearance, in connection with a supply of anything". The payment, act or forbearance may be voluntary and need not be by the recipient of the supply (s 9-15(2)). 8 The amount of GST on a taxable supply is 10 per cent of "the value of the taxable supply" (s 9-70), and in the present case this was assessed as being the consideration represented by the forfeited deposit. 9 Division 29 lays down rules for the attribution to a tax period of the GST payable on a taxable supply. The general rule (s 29-5) is that the supplier becomes liable to pay GST on the earlier of two events, namely the receipt by the supplier of any of the consideration for the taxable supply, and the issue of an invoice relating to that supply; in the present case no invoice was issued by the taxpayer and the only relevant event was the receipt of the alleged consideration. [Emphasis added in quotation of paragraph 5; footnote references incorporated into text of quote for reasons of different style requirements] 34 Given its "critical importance for the creation of liability to GST", it is as well to set out in full the text of s 9-5 of the GST Act : 9-5 - Taxable supplies You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with Australia; and (d) you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. 35 Reading the passage quoted from Reliance Carpet and s 9-5, and seized with the knowledge that an order for the winding up of a corporation does not vest its property in its liquidator one might, without more, think that the answer to the question posed in this case was clear; the sale of Lot 8 could only be a supply by PMD, not by Mr Greig. That is because the "supply" of Lot 8 was, prima facie , made by PMD and it was that corporation, not Mr Greig, to which the consideration for the sale of Lot 8 was payable and paid under the contract. 36 This position is submitted by the Commissioner to be affected by the operation of Div 147 of the GST Act in a way which renders Mr Greig personally liable for the GST payable in respect of the sale of Lot 8. 37 The nature of the Commissioner's submission is such that the whole of Division 147 should be set out: Division 147--Representatives of incapacitated entities 147-1 What this Division is about Representatives of incapacitated entities may be required to register for GST purposes. 147-5 Representatives are required to be registered (1) A *representative of an *incapacitated entity is required to be registered in that capacity if the incapacitated entity is *registered or *required to be registered. (2) This section has effect despite section 23-5 (which is about who is required to be registered). 147-10 Cancellation of registration of a representative (1) The Commissioner must cancel the *registration of a *representative of an *incapacitated entity if the Commissioner is satisfied that the representative is not *required to be registered in that capacity. Note: Cancelling the registration of a representative under this subsection is a reviewable GST decision (see Subdivision 110-F in Schedule 1 to the Taxation Administration Act 1953 ). (2) The Commissioner must notify the *representative of the cancellation. (3) Sections 25-50 and 25-55 do not apply to the cancellation of the *registration of a *representative of an *incapacitated entity. 147-15 Notice of cessation of representation A *representative who ceases to be a representative of an *incapacitated entity must notify the Commissioner of that cessation, in the *approved form, within 21 days after so ceasing. 147-20 Adjustments (1) If: (a) an *adjustment relates to a supply, acquisition or importation that an *incapacitated entity made before a *representative of the incapacitated entity was appointed; and (b) the adjustment arises after that appointment; and (c) in the case of an *increasing adjustment--the representative gives the Commissioner written notice that: (i) states that the adjustment has arisen in these circumstances; and (ii) specifies the amount of the adjustment; the adjustment is to be treated as if: (d) the representative did not have the adjustment; and (e) the incapacitated entity had the adjustment. (2) This section has effect despite section 17 - 10 (which is about the effect of adjustments on net amounts). 147-25 Tax periods of representatives (1) If a *representative of an *incapacitated entity is required to be registered in that capacity, the tax periods applying to the representative in that capacity are the same tax periods that apply to the incapacitated entity. (2) This section has effect despite Division 27 (which is about how to work out the tax periods that apply).