ATO ID 2004/315: GST and sale of land by the sheriff of a court
Date of decision: 18 June 2003
Business line: Indirect Tax

Issue
Is the entity, a government department that employs the Sheriff of a court, making a taxable supply under either section 105-5 or section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when, under an enforcement warrant, the Sheriff is required to sell the property of a debtor?

Decision
Yes, the entity is making a taxable supply under section 9-5 of the GST Act when, under an enforcement warrant, the Sheriff is required to sell the property of a debtor.

Facts
The entity is a government department. The entity is the employer of the Sheriff of a court. A creditor has obtained a court judgment against a debtor. The debtor has failed to pay the judgment debt and the creditor has filed an enforcement warrant for the seizure and sale of property owned by the debtor. The court issued an enforcement warrant for the seizure of a vacant lot of land owned by the debtor. The vacant lot is in Australia. The Sheriff of the court is now required to sell the debtor's property for consideration. The Sheriff is not acting as an agent of either the creditor or the debtor. The Sheriff is also not a representative as defined in section 195-1 of the GST Act as the Sheriff is not appointed or authorised to manage the affairs of the debtor because the debtor is unable to pay all debts as and when they become due and payable. The sale of the debtor's property is made for consideration. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: Section 105-5 of the GST Act provides that a supply made by a creditor in satisfaction of a debt is a taxable supply if: The first requirement of section 105-5 of the GST Act is that an entity supplies the property of the debtor, to a third party, in satisfaction of a debt that the debtor owes to the entity. A creditor has obtained a court judgment against a debtor. The debtor has failed to pay the judgment debt and the creditor has filed an enforcement warrant for the seizure and sale of property owned by the debtor resulting in the court issuing an enforcement warrant for the seizure of a vacant lot of land owned by the debtor. In selling the debtor's property, the Sheriff is not acting as an agent of either the creditor or the debtor. While the Sheriff is selling the debtor's property, to a third party, the judgment debt is not a debt owed to the Sheriff. The Sheriff's role is to enforce payment of the amount, which is due to the creditor under the judgment, by selling the land. The Sheriff is an employee of the entity. Therefore, the sale of the land is not in satisfaction of a debt that the debtor owes to the entity and as such, section 105-5 of the GST Act does not apply to the sale and the rules in Division 9 of the GST Act must be considered. Under section 9-5 of the GST Act, an entity makes a taxable supply if: The sale of the debtor's property is for consideration. The Sheriff is an employee of the government department and organising the sale of property in their capacity as Sheriff. The Sheriff is also not a representative under Division 147 of the GST Act. It follows that the entity, the government department, is supplying the land. Section 9-20 of the GST Act defines enterprise to include an activity or series of activities done by the Commonwealth, a State or a Territory. Therefore, the entity is supplying the land in the course of an enterprise that it carries on. The debtor's property is in Australia and the entity is registered for GST. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when, under an enforcement warrant, the Sheriff of a court is required to sell the property of a debtor.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 Division 9 section 9-5 section 9-20 Division 38 Division 40 section 105-5 Division 147 section 195-1
Subject references: Goods and services tax GST supplies in satisfaction of debt GST supplies & acquisitions Taxable supply