Today the Commissioner published two ATO IDs dealing with incapacitated entities and Division 58 of the GST Act.  Division 58 was introduced to replace Division 147 after the Federal Court found in Deputy Commissioner of Taxation v PM Developments Pty Ltd [2008] FCA 1886 that the Division effectively did not work.  The IDs are discussed below and they can also be accessed via the menu on this site.

ATO ID 2012/6 – GST and representative of an incapacitated entity acting as both supplier and recipient of the representative’s administration services

• This ID shows that a single entity may act in more than one capacity for the purposes of the GST Act and that can effectively conduct taxable transactions between itself
• A was acting as administrator for an incapacitated entity and as part of the administration paid administration fees to A in his capacity as the insolvency practitioner.  A is registered twice for GST, once as an entity pursuant to Division 58 and once as an entity pursuant to Division 23 – the incapacitated entity was also registered for GST
• In finding that A was entitled to input tax credits for the payment of the fees, the Commissioner noted that the same legal person acted in two different capacities and was treated as two separate entities for the purposes of the GST Act

ATO ID 2012/7 – GST and liability for a supply made by an incapacitated entity prior to the appointment of a representative

• The Commissioner found that the representative entity was not liable for GST under s 58-10 of the GST Act when it received consideration for a supply that was made by the incapacitated entity prior to the appointment of the representative – it was the incapacitated entity who was liable for GST.
• There is nothing particularly controversial about this conclusion – what may be controversial however is determining whether the supply was “made” prior to the appointment of the representative.  For example, in The Trustee for Naidu Family Trust and Commissioner of Taxation [2011] AATA 909 a mortgagee in possession who completed a contract of sale (which had been executed by the vendor) contended that the supply had been made on contract.  While that case related to s 105-5 of the GST Act, similar timing issues may arise with regard to Division 58.