ATO Interpretative Decision

ATO ID 2002/19 (Withdrawn)

Goods and Services Tax

• This ATO Interpretative Decision is withdrawn from the database because it contains a view in respect of the operation of a legislative provision that has been repealed. Division 147 of the A New Tax System (Goods and Services Tax) Act 1999 was repealed with effect from 4 December 2009.
  See ATO Interpretative Decision 2012/6 for a view in respect of the operation of Division 58 (which replaced Division 147).
  This document has changed over time. View its history.

Issue

Is entity A, an administrator acting in its capacity as the representative for an incapacitated entity, entitled to input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for administration fees imposed by entity B, the administrator in its capacity as an insolvency practitioner, where entity A and entity B are the same legal person?

Decision

Yes, entity A is entitled to input tax credits under section 11-20 of the GST Act for administration fees imposed by entity B, where entity A and entity B are the same legal person.

Facts

Entity A and entity B are the same legal person, an administrator, acting in two different capacities. Entity A is the administrator acting in its capacity as the representative for an incapacitated entity that makes only taxable supplies. Entity B is the administrator acting in its capacity as an insolvency practitioner.

The legal person is registered twice for goods and services tax (GST). Once as entity A pursuant to Division 147 of the GST Act and once as entity B under Division 23 of the GST Act. The incapacitated entity is also registered for GST.

The supply by entity B to entity A is a taxable supply under section 9-5 of the GST Act. Entity A is liable to pay entity B's fees.

Reasons for Decision

An entity is entitled to input tax credits under section 11-20 of the GST Act for creditable acquisitions that it makes.

Under section 11-5 of the GST Act, an entity makes a creditable acquisition if:

(a)

it acquires anything solely or partly for a creditable purpose;

(b)

the supply to it is a taxable supply;

(c)

it provides, or is liable to provide, consideration for the supply; and

(d)

the entity is registered or required to be registered for GST.

The first requirement in section 11-5 of the GST Act is that an entity must make the acquisition for a creditable purpose. Therefore, the first issue in this case is whether a single legal person can make an acquisition from itself.

In accordance with subsection 184-1(3) of the GST Act, a legal person can have a number of different capacities. In each of these capacities, the legal person is taken to be a different entity for GST purposes.

In this case, the legal person, has two different capacities, as an insolvency practitioner and as the representative of the incapacitated entity. Therefore, the legal person is two separate entities for the purposes of the GST Act. As such, entity A, the administrator in its capacity as the representative of the incapacitated entity can make an acquisition from entity B, the administrator in its capacity as an insolvency practitioner.

Under section 11-15 of the GST Act, an entity acquires something for a creditable purpose to the extent that it is acquired in carrying on the entity's enterprise. During a period of administration, the representative in its representative capacity, can make supplies and acquisitions. Acquisitions made in the course of managing a company's business or of selling a company's assets will be acquisitions made in the course or furtherance of an enterprise carried on by the representative. Therefore, the acquisition of entity B's services is made by entity A for a creditable purpose.

The second requirement in section 11-5 of the GST Act is that the supply of the thing is a taxable supply. In this case, the supply of services by entity B is a taxable supply under section 9-5 of the GST Act.

The third requirement of section 11-5 of the GST Act is that the entity must provide, or be liable to provide the consideration for the supply. Entity A is liable to pay entity B's fees and therefore the third requirement is satisfied.

The last requirement in section 11-5 of the GST Act is that the entity must be registered, or required to be registered, for GST. In this case, the incapacitated entity is registered for GST and as such, entity A, the representative of the incapacitated entity, registered for GST pursuant to Division 147 of the GST Act.

Therefore, the acquisition meets the requirements in section 11-5 of the GST Act and entity A is making a creditable acquisition. As entity A is making a creditable acquisition, it is entitled to input tax credits under section 11-20 of the GST Act for administration fees imposed by entity B.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 11-5
   section 11-15
   section 11-20
   Division 23
   Division 147
   subsection 184-1(3)

Keywords
Goods & services tax
GST special rules
Representative of incapacitated entities
GST supplies & acquisitions
Creditable acquisition
Creditable purpose

Business Line:  GST

Date of publication:  9 January 2002

ISSN: 1445-2782