Private ruling: GST and representative of incapacitated entity
Published: April 2013

Ruling: Q1: Is the Administrator of the Company required to remit GST on receipts from pre-appointment debtors? | A1: No. | Q2: Would the outcome be the same if the Company was registered for GST on a cash basis prior to the appointment of the Administrator? | A2: Yes.

Relevant facts and circumstances: The Company operated a business. The Administrator was appointed Voluntary Administrator of the Company. Following his appointment, the Administrator registered a new Australian Business Number (ABN) branch for the Company and reported GST under this branch. The GST registration was on a cash basis. The Company executed a Deed of Company Arrangement and the Administrator was subsequently appointed Deed Administrator of the Company. Following his appointment as Deed Administrator, the Administrator registered a further ABN branch for the Company and reported GST under this branch. The GST registration was on a cash basis. From the date of incorporation of the Company until the appointment of the Administrator, the Company provided services and issued invoices to customers. On the date of the appointment of the Administrator, the Company had a number of sales invoices outstanding from customers. Up until the appointment of the Administrator, the Company was registered for GST on an accruals basis. During the course of the Administration of the Company, the Administrator received payment from customers of the Company for invoices issued by the Company prior to the appointment of the Administrator i.e. pre-appointment debtor receipts.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 58-10 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Summary: The supplies related to the outstanding invoices are outside the scope of the Administrator's responsibility or authority for managing the Company's affairs. | Detailed Reasoning - Detailed reasoning: Under subsection 58-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a representative of an incapacitated entity is liable to pay any GST that the incapacitated entity would, but for section 58-10 of the GST Act or section 48-40 of the GST Act, be liable to pay on a taxable supply to the extent that the making of the supply is within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs. A representative, for the purposes of Division 58 of the GST Act is defined in section 195-1 of the GST Act: representative means: (a) a trustee in bankruptcy; or (b) a *liquidator; or (c) a receiver; or (ca) a controller (within the meaning of section 9 of the Corporations Act 2001 ); or (d) an administrator appointed to an entity under Division 2 of Part 5.3A of the Corporations Act 2001 ; or (e) a person appointed, or authorised, under an *Australian law to manage the affairs of an entity because it is unable to pay all its debts as and when they become due and payable; or (f) an administrator of a deed of company arrangement executed by the entity. In the current case, the incapacitated entity, i.e. the Company made supplies to its debtors prior to the appointment of the representative i.e. Administrator. As the supplies were made by the Company prior to the appointment of the Administrator, the making of the supplies clearly did not fall within the Administrator's responsibility or authority for managing the Company's affairs, at the time the supplies were made. The mere subsequent receipt by the Administrator of the consideration for the supplies that were made by the Company before the Administrator's appointment does not have the effect of bringing the 'making' of the supply within the scope of the Administrator's responsibility or authority for managing the Company's affairs with respect to the requirements of Division 58 of the GST Act. Accordingly, because the supplies are not within the scope of authority of the Administrator, the Administrator is not liable for the GST on the taxable supplies under subsection 58-10(1) of the GST Act, despite the fact that the Administrator receives consideration for the supplies. Instead, the Company alone rather than the Administrator in his role as Administrator of the Company is liable for GST, under section 9-40 of the GST Act. In this case, this reasoning is applicable irrespective of the Company's accounting method as the relevant time period is measured under section 9-5 of the GST Act, which deals with making taxable supplies rather than section 29-5 of the GST Act which deals with the attribution rules for cash and accruals accounting entities.