ATO ID 2004/486: GST and proceeds received by owner of impounded livestock sold by a local council
Date of decision: 13 January 2003
Business line: Indirect Tax

Issue
Is the entity, a farmer, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, after lodging a claim under the relevant local council by-laws, it receives proceeds from the sale of its impounded livestock?

Decision
No, the entity is not making a taxable supply under section 9-5 of the GST Act when, after lodging a claim under the relevant local council by-laws, it receives proceeds from the sale of its impounded livestock. The entity is not making a supply.

Facts
The entity is a farmer. Some of the entity's livestock strayed and were impounded by the local council. The entity was not aware that the livestock had strayed and been impounded. Under the relevant local council by-laws, the local council can sell impounded livestock after a specified period if the owner of the livestock cannot be identified. The local council sold the impounded livestock, by way of a public auction. The local council's supply of the impounded livestock was a taxable supply under section 9-5 of the GST Act. As required by the local council by-laws, it held the proceeds from the sale, less the costs of impounding and selling the livestock, on trust for collection by the owner once identified. After the auction had taken place, the entity became aware that the livestock had been impounded. Under the relevant council by-laws, the entity put in a claim for the proceeds from the sale of the livestock. The local council gave the entity the proceeds from the sale. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. One of the requirements of a taxable supply is that an entity makes a supply (subsection 9-5(a) of the GST Act). Therefore, it must first be established that the entity made a supply. The term 'supply' is a broad concept for GST purposes and is defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. Without limiting subsection 9-10(1), under subsection 9-10(2) of the GST Act, a 'supply' includes: • a supply of goods • a supply of services • a provision of advice or information • a grant, assignment or surrender of real property • a creation, grant, transfer, assignment or surrender of any right • a financial supply • an entry into, or release from, an obligation, to do anything, to refrain from doing something, or to tolerate an act or situation • any combination of these. However, for an entity to make a supply it must take some action or do something to cause the supply to be made (see paragraphs 71 to 79 of Goods and Services Tax Ruling GSTR 2006/9). In this case, the entity's livestock strayed and were impounded by the local council. Under the relevant council by-laws, the local council sold the impounded livestock, by way of a public auction. The entity did not take any action to cause the impoundment or sale of the livestock to occur. Therefore, the entity did not make a supply of the livestock to the local council or the purchaser. To receive the proceeds from the sale of the impounded livestock that the local council were holding on trust, the entity was required to lodge a claim. The lodgement of the claim to the sale proceeds is not a supply. As the entity is not making a supply, the entity is not making a taxable supply under section 9-5 of the GST Act when, after lodging a claim under the relevant government legislation, it receives proceeds from the sale of its impounded livestock

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-5(a) section 9-10 subsection 9-10(1) subsection 9-10(2)
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2006/9
Related ATO interpretative decisions: ATO ID 2004/485
Subject references: Goods and services tax GST primary production GST livestock GST supplies & acquisitions GST supply