Where a company becomes an “incapacitated entity” Division 58 of the GST Act seeks to shift the company’s obligation to pay GST and its entitlement to input tax credits to the “representative”, such as the administrator, receiver or liquidator. In Richard Albarran, Brent Kijurina and Cameron Shaw as Joint Administrators of Cooper & Oxley Builders Pty Ltd as trustee for the Cooper & Oxley Builders Unit Trust and Commissioner of Taxation  AATA 4325 the Tribunal was required to address the difficult question of who was entitled to input tax credits where:
- the company accounted for GST on an accruals basis and made the acquisition prior to the appointment of an Administrator; and
- the Administrator accounted for GST on a cash basis and paid for the acquisition after its appointment.
The parties agreed that the company and the Administrator were not each entitled to the input tax credits. The Administrators contended that they were entitled to the credits. The Commissioner contended that the company was entitled to the credits. The Tribunal agreed with the Commissioner.
The nub of the dispute appears to have been whether Division 58, particularly s 58-10(1) which entitles the representative entity to input tax credits “to the extent that the making of the acquisition to which the…input tax credit…relates is within the scope of the representative’s responsibility or authority for managing the incapacitated entity’s affairs“, is only engaged where the acquisition is “made” during the period of appointment – with the effect that the entitlement to input tax credits for creditable acquisitions made prior to the appointment remaining with the company.
The Tribunal undertook a detailed consideration of the text of the provisions, policy considerations and the extrinsic materials and agreed with the Commissioner’s construction of s 58-10 of the GST Act, which confined the section to supplies and acquisitions made by the representative. The Tribunal considered that this reflected a more natural reading of the provision and was coherent with the scheme of the GST Act in relation to GST on taxable supplies and ITCs on creditable acquisitions and their attribution to tax periods. The Tribunal also considered that:
- Nothing in the context of the surrounding provisions, nor the EM, clearly indicates otherwise.
- The practical outcome of this construction – that representatives are only liable for GST on taxable supplies, and entitled to ITCs on creditable acquisitions, which they actually make, and not on supplies and acquisitions made before their appointment by an entity over which they had no control – was not suggestive of a manifestly absurd, unreasonable or improbable intention to attribute to Parliament.