Private ruling: Goods and services tax (GST) and ascribing activities of a representative of an incapacitated entity.
Date of advice: 18 December 2015
Published: March 2016

Ruling: Q1: Are the Administrators, in their capacity as joint and several administrators (you) of Entity A, liable to pay GST on any taxable supply, and entitled to any input tax credit (ITC) on any creditable acquisition, made by Entity A or another member of the Entity A GST group before the time of your appointment on a certain day? | A1: No, any taxable supply or creditable acquisition made by Entity A or another member of the Entity A GST group before the time of your appointment on a certain day, to which the liability for GST and entitlement to any ITC relates, is outside the scope of your responsibility or authority as representative for managing the affairs of the incapacitated entity, Entity A in its capacity as representative of the Entity A GST group. All legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless otherwise stated. Section 58-5 explains the general principle for the relationship between incapacitated entities and their representatives. It provides, amongst other things, that subject to Division 58, any supply or acquisition by an entity in the capacity of a representative of another entity that is an incapacitated entity is taken to be a supply by the other entity. Section 58-10 provides for circumstances in which representatives have GST-related liabilities and entitlements. Under subsection 58-10(1), a representative of an incapacitated entity is liable to pay any GST and entitled to any ITC that the incapacitated entity would, but for sections 48-40 and 48-45 (which are about GST groups and liability for GST and entitlement to ITCs), be liable to pay on a taxable supply or entitled to on a creditable acquisition. Section 58-10 also limits the GST liability and the entitlement to an ITC to the extent that the making of the supply or acquisition to which the GST and ITC relates is within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs. Subsection 58-10(5) provides that an incapacitated entity or, if the incapacitated entity is a member of a GST group, the representative member of that group (Group representative), is not liable to pay the GST on a taxable supply or entitled to the ITC on a creditable acquisition to the extent that a representative of the incapacitated entity is liable to pay the GST on the supply or entitled to the ITC on the acquisition under Division 58. Under section 48-40, the GST payable on a taxable supply made by a member of a GST group is payable by the Group representative and is not payable by the member that made it (unless that member is the Group representative). Under section 48-45, in relation to the entitlement to the ITC on a creditable acquisition made by a member of a GST group, the Group representative is entitled to the ITC and the member making the acquisition is not entitled to the ITC (unless that member is the Group representative). In this case, Entity A is the Group representative of a GST group (under administration) with the other members (Entity A GST group). Under section 195-1, an 'incapacitated entity' includes an entity that is in liquidation or receivership or an entity that has a representative. A 'representative' includes an administrator appointed to an entity under Division 2 of part 5.3A of the Corporations Act 2001 (Cth) (Corporations Act) and a liquidator. You were appointed joint and several administrators of Entity A at a particular time on a certain day pursuant to section 436A of the Corporations Act. Also on that day, between other particular times, you were appointed administrators of the other members of the Entity A GST group. Accordingly, in relation to Entity A, you are the representative from the particular time of appointment to Entity A on that certain day and Entity A is the incapacitated entity within the meaning of the GST Act. You are also the representative of Entity A in its capacity as the Group representative of the Entity A GST group, and of the other members of the group, for GST purposes. Subsection 48-75(1) provides that the effect of the Group representative of a GST group becoming an incapacitated entity, and not ceasing to be a member of the group, is that the entity continues to be the Group representative if all the other members of the group are incapacitated entities. In the circumstances of the Entity A GST group, Entity A continues to be the Group representative as all the other members are also incapacitated entities. Therefore, for the purposes of section 58-10, it is considered that your responsibility or authority as representative for managing the affairs of the incapacitated entity, Entity A, in its capacity as Group representative of the Entity A GST group, commenced at the particular time of your appointment as administrators of Entity A on that certain day. The relevant circumstances include that you were appointed administrators of the other members of the Entity A GST group immediately after your appointment to Entity A and no taxable supplies or creditable acquisitions were made by any member during the brief period in which the appointments were being made between particular times on that day. Consequently, you are not liable to pay GST on any taxable supply, and not entitled to any ITC on any creditable acquisition, made by Entity A or another member of the Entity A GST group before the time of your appointment to Entity A at the particular time on that certain day, as the making of the supply or acquisition is outside the scope of your responsibility or authority. | Q2: Is the amount of GST payable, and the entitlement to an ITC, which relates to a taxable supply or a creditable acquisition made by Entity A or another member of the Entity A GST group on that certain day, but before the time of your appointment as administrators of Entity A at the particular time on that day, attributed to the tax period of Entity A which ended on the day before Entity A became incapacitated? | A2: Yes, the amount of GST payable and the ITC to which there is an entitlement is attributed to the tax period of Entity A, in its capacity as Group representative of the Entity A GST group, which ended on the day before Entity A became incapacitated. Subsection 27-39(1) provides that, if an entity becomes incapacitated, the entity's tax period at the time is taken to have ended at the end of the day before the entity became incapacitated (first tax period). Under subsection 27-39(2), if the first tax period ends on a particular day because of subsection (1), the next tax period starts on the day after that day and ends when the first tax period would have ended but for that subsection. As discussed above in the answer to Question 1, it is considered that your responsibility or authority as representative for managing the affairs of the incapacitated entity, Entity A, in its capacity as Group representative of the Entity A GST group, commenced at the particular time of your appointment as administrators of Entity A on that certain day. Therefore, the amount of GST payable, and the entitlement to an ITC, which relates to a taxable supply or a creditable acquisition made by Entity A or another member of the Entity A GST group on that certain day, but before the particular time of your appointment as administrators of Entity A on that day, is attributed to the first tax period of Entity A (in its capacity as Group representative of the Entity A GST group) which ended on the day before the day of your appointment as the making of the supply or acquisition is outside the scope of your responsibility or authority.

Relevant facts and circumstances: You are registered for GST. Entity A is registered for GST and is the Group representative of the Entity A GST group (under administration). At a particular time on a certain day, the Board of Directors of Entity A appointed you as joint and several administrators pursuant to section 436A of the Corporations Act. On that day, between particular times, you were also appointed administrators of the other members of the Entity A GST group pursuant to section 436A of the Corporations Act. Members of the Entity A GST group made taxable supplies and creditable acquisitions before that certain day and on that day, prior to the particular time of your appointment to Entity A. However, no supplies or acquisitions were made between the particular time of your appointment to Entity A and the other particular times of your appointment to the other members on that day.

Relevant legislative provisions: References to the GST Act: • subsection 27-39(1) | • subsection 27-39(2) | • section 48-40 | • section 48-45 | • subsection 48-75(1) | • Division 58 | • section 58-5 | • section 58-10 | • subsection 58-10(1) | • subsection 58-10(5) | • section 195-1. | References to the Corporations Act: • Part 5.3A Division 2 | • section 436A.