Private ruling: Whether you are entitled to input tax credits in relation to legal expenses
Date of advice: 13 September 2016
Published: October 2016

Ruling: Q1: Are you, entitled to GST credits (also known as input tax credits) on all payments made to your barrister for legal expenses, including payments made by you and payments made by third parties? | A1: No, you only entitled to partial GST credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). You are not entitled to GST credits on the acquisitions referrable to payments made on various dates in Years I to Year L because the four-year time limit in section 105-55 of Schedule 1 to the Tax Administration Act 1953 (TAA) for entitlement to GST credit has been exceeded. You are entitled to an amount of 1/11 th of $Z of GST credit in relation to your creditable acquisitions (legal expenses) referrable to the amount of $Z paid by third parties to your barrister on a date in Year M. Section 29-10(3) states, that, provided that you hold a tax invoice, you can attribute this GST credit to the relevant tax period in Year M. Section 11-20 of the GST Act states, that you are entitled to the GST credit for any creditable acquisition that you make. Section 11-5 of the GST Act states that you make a creditable acquisition if • you acquire anything solely or partly for a creditable purpose; and • the supply of the thing to you is a taxable supply; and • you provide or are liable to provide consideration for the supply; and • you are registered or required to be registered for GST. Under section 11-15 of the GST Act you broadly acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise but not to the extent that the acquisition • relates to making supplies that would be input taxed, or • is of a private or domestic nature. You have stated that you were carrying on an enterprise as a trustee at the relevant times since a date in Year D and as a result your legal expenses of $X are creditable acquisitions under section 11-5 of the GST Act as the legal services were for a creditable purpose, a taxable supply to you, you were liable to provide consideration and you were registered for GST at the times when those legal expenses were incurred.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You registered for an Australian Business Number (ABN) from a date in Year G. You were registered for GST from a date in Year G to a date in Year J. You re-registered for GST on a date in Year K. You, account for GST on a cash basis and report quarterly. You have been on the Roll of Barristers and Solicitors since Year A. Admission to the legal profession does not entitle you to engage in legal practice. You must also hold a current practising certificate. You began carrying on an enterprise as a sole trader lawyer from an unknown date but by Year B and also commenced a solicitor's nominee specific practice. The Secretary of the Solicitors Board gave notice of his intention to cancel your practising certificate for Year C and to refuse your application for a practising certificate for the Year D. On various dates in Year E proceedings were brought before the Solicitors Board against you for numerous offences of statutory misconduct including wilful or reckless non-compliance with rules relating to professional conduct and also charges of misconduct at common law including breaches of trust. The Solicitors Board ordered that you were entitled to re-apply for a practising certificate only after a date in Year H. Your practising certificate was cancelled on or around a date in Year C. On a date in Year C a receiver was appointed by order of the court, who, assumed possession and control of the trust property and commenced to conduct your solicitor's practice. The Supreme Court of an Australian state on a date in Year D ordered that the receiver return to you in your personal capacity and not as a solicitor all files, titles, mortgages and other documents and forms of security relating to certain mortgages. You have stated that you were carrying on an enterprise as a trustee at the relevant times since a date in Year D. You executed a deed under Part X of the Bankruptcy Act 1966 (Cth) on a date in Year E. This is also known as a Personal Insolvency Agreement (PIA). You were discharged from the PIA on a date in Year F. You obtained a practising certificate again on or around a date in Year H carrying on a practice as an Australian current legal practitioner. You were sued by a former client in Year I in relation to acting as the client's trustee of trust moneys held your solicitors' practice from Year B to an unspecified date prior to Year G and also from around a date in Year D as trustee of what is referred to as the Particular Trust. You have been issued tax invoices in relation to the litigation initiated in Year I and which continued to Year L totalling $X for legal services provided to you by a lawyer (barrister). Your barrister was registered for GST at the time you incurred the legal expenses. You, your former client who sued you in Year I and other parties to the litigation entered into Deed of Settlement around a date in Year L. One of the things agreed to under the Deed of Settlement was the application of funds arising from the liquidation of a particular entity. You have provided to us an undated and unsigned copy of this Deed of Settlement but not an executed Deed of Settlement. You, your barrister and various other parties entered into a Deed (deed) on a date in Year L. Under the deed any monies payable to some of those other parties arising from the liquidation of a particular entity would be placed in trust. The first $R paid by the liquidator would be divided equally between your barrister and another lawyer as consideration for legal fees for you and some of the other parties. Under the deed, your barrister and other lawyer agreed that if each received half of $R that sum would discharge all their fees for acting for their clients. You have provided to us a dated and signed copy of this Deed You have been given a Statement of Selected Accounts as at a date in Year M from a barrister accounting firm which lists amounts charged and paid to your account in relation to your barrister. This lists fees totalling $X with payments totalling $Y made from Year I to Year L and further payments totalling $Z made on a date in Year M. You have not provided copies of the tax invoices for the above acquisitions. On a date in Year M your barrister received $Z in relation to the deed. You have not notified the Commissioner under section 105-55 of Schedule 1 to the Tax Administration Act 1953 (TAA) of an entitlement to a refund or credit in relation to any GST credit for the $X of legal expenses for your barrister except by lodgment of the activity statement for the relevant tax period in Year M. You have submitted an application for a private ruling asking if you are entitled to an amount of GST credit in relation to all payments your barrister has received for your legal expenses, including payments made by third parties. A check of the Register of Legal Practitioners & Law Practices of the specific states Legal Services Board shows you listed as a legal practitioner currently.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) • Section 9-70 | • Section 9-75 | • Section 11-5 | • Section 11-15 | • Section 11-20 | • Section 11-25 | • Section 29-10 | • Section 93-5 | Tax Administration Act 1953 (TAA) • Schedule 1 Section 105-55