Private ruling: GST and Representatives and incapacitated entities
Date of advice: 6 November 2017
Published: March 2018

Ruling: Q1: Are you, the Receivers and Managers, liable for GST on any supplies or entitled to any input tax credits on any acquisitions in relation to your appointment over the assets of a partnership, (the Partnership) pursuant to Division 58 of the A New Tax System (Goods and Services Tax) Act 1999 ? | A1: No, as there were no supplies or acquisitions made by the partnership during your appointment, there will be no GST liability or entitlement to input tax credits.

Relevant facts and circumstances: On ddmmyyyy, Entity A and Entity B registered for GST as a partnership (the Partnership). They operated in a relevant industry and acquired a number of assets in the process of that enterprise. The partnership used two trading names. Some or all of the assets of the Partnership were secured with a Bank (Mortgagee). The Partnership entered into two business mortgages with the Mortgagee set out in two separate mortgages in the names of the two trading names. Clause X of the Business Mortgage (details that the partners had provided security: The schedules to the Mortgage listed the assets which were mortgaged. On ddmmyyyy a Family Court order was made in relation to the assets listed in the schedule to the mortgage Under the Family Court Consent Entity B consented to sign any document required in relation to the transfer to Entity A or an entity solely controlled or owned by Entity A: Title to the assets (the Transferred Assets) was transferred to a Trust controlled by Entity A. Loan accounts were raised between the Partnership and the Trust to reflect these transfers. The Mortgagee did not release the Transferred Assets from the securities they held when they were transferred to the Trust. The Mortgagee did not enter into any new finance agreements with the Trust in relation to any of the assets over and above the securities already in place. The General Manager of the Group advised the Receivers and Managers that: ● Following the transfers the Partnership ceased trading ● The assets continued to be used by the Trust who invoiced another member of the group and ● There were no formal hire agreements for these arrangements. On ddmmyyyy, you, the Receivers and Managers, were appointed to the assets of the Partnership. At this time the Partnership did not hold any assets and had ceased trading. The property, rights and powers and security the Receivers were appointed over are set out in the Schedules to the Deed of appointment. The Background of the appointment sets out that: ● The Mortgagee holds the security interests over various assets set out in Schedule X to the appointment. ● The Mortgagor is in default and the security has become enforceable and ● The Mortgagee is entitled to appoint a Receiver Manager to the property of the Mortgagor, the subject of the security. The operative provisions of the appointment provide that: ● The Mortgagee appoints the Receivers, jointly and severally as Receiver Managers of the undertaking, property and assets of the mortgagor and to exercise the rights and powers set out in the Schedules. The schedule provides relevantly that the receivers were appointed over the following property. ● All of the assets of the undertakings and assets of the partnership and ● Any right, undertaking or property the subject of the security. All of your activities as Receivers and Managers, including employing staff to prepare assets for sale were undertaken in relation to the assets owned by the Trust. You engaged an auctioneer and sold the assets of the Trust. The Auctioneers website for the sale stated that the sale was Under Instructions from the Receiver and Managers in various matters.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Division 58, | A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 and | Corporations Act 2001 Section 9.

Reasons for decision: Summary: Division 58 sets out how to ascribe activities of a representative of an incapacitated entity between the representative and the incapacitated entity for GST purposes. Section 195-1 provides that a representative relevantly includes a receiver and the Corporations Act includes in the definition of receiver a receiver manager. You are Receivers and Managers of specified assets. Therefore you meet the definition of representative. An incapacitated entity is defined to mean an entity that has a representative. As you were appointed as a representative over the assets of the Partnership, the partnership is an incapacitated entity. Under section 58-20, 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 for GST. The Partnership was registered for GST at the time of your appointment and therefore you were required to be registered for GST. Our records indicate that you registered for GST. Section 58-10 provides that a representative of an incapacitated entity is liable to pay any GST that the incapacitated entity would, but for this section or section 48-40, be liable to pay on a taxable supply to the extent that the making of the supply or acquisition to which the GST or input tax credit is within the scope of the representatives responsibility or authority for managing the incapacitated entities affairs. On the facts supplied, at the time of you appointment, the Partnership had no assets and had ceased trading following the family court order. As the Partnership had ceased trading and had no assets, you have not made any supplies or acquisitions, in your capacity as Receivers and Managers. Therefore in your capacity of Receivers and Managers over the assets of the Partnership, you are not liable for GST or entitled to any GST credits. | Detailed Reasoning - Additional information: Where, at a later date you find that in fact there were some other supplies or acquisitions made during the period and within the scope of your appointment you will be liable for GST on any of those supplies and entitled to any GST credits on those acquisitions. Where you have reported the GST liabilities and credits associated with the operations of the Trust under the ABN of the Partnership you will be required to amend the relevant BAS of the Partnership to exclude these liabilities and credits and report them in the additional Client Account of The Trust.