ATO Private Rulings – April 2012

In April 2012, over 60 private rulings dealing with GST were published on the private rulings register.

The private rulings I found interesting deal with GST refunds and going concerns.  The refund ruling appears to take the view that the Commissioner can rely on s 105-65 in the context of the operation of the adjustment provisions in Division 19 of the GST Act.

Ruling No. 1012091511798 – GST and refunds of overpayments

This application involves the perennial question of whether the Commissioner will exercise his discretion in s 105-65 and refund overpaid GST.  Where this ruling is interesting is that it appears to involve the question of whether that discretion will (or indeed can) be exercised where the refund is otherwise payable by way of an adjustment pursuant to Division 19 of the GST Act.

The facts of the ruling involve the sale of land by way of a terms contract where the parties entered into an agreement to terminate the sale contract, whereby the instalment payments were to be repaid to the purchaser.  GST had been paid on the instalments by the vendor and the purchaser had claimed input tax credits.

While it is not clear from the ruling, it appears that the basis for the refund arose from the operation of the adjustment provisions in Division 19.  Further, the Commissioner considers that s 105-65 applies because the taxpayer treated an arrangement as giving rise to a taxable supply but it did not give rise to a taxable supply.  This may be considered to be a controversial view, given that the apparent intent of s 105-65 is to address the implications of parties mistakenly treating supplies as taxable where they are not – e.g., because they are GST-free.  In the present circumstances, the parties at all times correctly treated the transaction as taxable until the transaction was cancelled, triggering Division 19 which operates to unwind the GST consequences of the transaction.  One may question whether s 105-65 should interfere with that process.

Ruling No 10102090255175 – GST and going concerns

The issue in this ruling was whether the sale of a motor vehicle repair business was GST-free as the supply of a going concern.  What I found interesting was the discussion of the implications of the statutory licence which was necessary to operate the business, but could not be transferred by the vendor.  The agreement provided that if the licence could not be transferred to the purchaser, that the vendor would make all reasonable efforts to have a new operating licence issued to the purchaser.  The ruling took the view that provided a new licence was issued to the purchaser, the vendor would be “considered to have have supplied the purchaser with an operating licence in respect of the relevant premises, for the purposes of the going concern provisions”.

I personally struggle with the conclusion in the ruling, essentially because the requirement of s 38-325(2) of the GST Act is that “the supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise”.  In circumstances where the supplier has no ability to transfer a statutory licence and a new licence must be issued to the purchaser, I cannot see how the words of s 38-325(2) can be satisfied.

The private ruling refers to paragraph 53 of GSTR 2002/5 and seeks to address the issue in the following way:

In accordance with paragraph 53 of GSTR 2002/5, the supply of a thing which is incapable of assignment or supply because of a statutory or legal impediment, but which is necessary for the continued operation of an enterprise by a party other than the supplier is taken to be a supply to the purchaser of that thing for the purposes of section 38-325 of the GST Act, where the following criteria are met:

– the vendor of the enterprise makes all reasonable efforts to have the thing supplied to the recipient, for example, by way of surrender;

– the supply to the purchaser is by a statutory authority or other party to the relevant contract with the vendor; and

– the thing is actually supplied to the purchaser by a party other than the vendor.

While I can appreciate the commercial practicality of this approach, I struggle with how it can fit within the clear words of the section.  In recent times, the Federal Court appears to have moved away from the purposive, “practical business tax”, approach to the interpretation of the GST Act, towards a more literal construction.  I do wonder what the Federal Court would make of the question.


Taxable supply

  • GST and ex-gratia payments made in lieu of local government rates – whether ex-gratia payments made by A to B (a local government authority) pursuant to obligations under Lease in lieu of local government rates are treated as consideration for supplies made by B to A
  • GST and trustee services – whether an entity (in its personal capacity) make a taxable supply of trustee services to a superannuation fund where the consideration is deducted from the Fund and includes an “adviser fee”
  • GST and out of court settlements – whether the amount received as a result of an out of court settlement consideration for  taxable supply – amount received as settlement for action to recover amounts payable under an agreement to reimburse claimant for certain expenses arising out of a sale of land to a third party
  • GST and monies held in trust and supply of management/marketing service – whether money received in trust for payment of prizes consideration for a supply – whether entity making taxable supplies when supplying management/marketing services to your client
  • GST and court settlement – whether GST payable on proceeds from settlement of dispute over purchaser of licence agreement – whether sufficient nexus between surrender of licence agreement and receipt of payment
  • GST and internet sales – whether GST payable on the sale of goods delivered direct from overseas supplier to Australian-based customer of Australian retailer
  • GST and roofing work – whether GST payable on supply and fitting of roof to a leased residential house owned by a non-resident
  • GST and settlement and release agreement – whether entity makes a taxable supply under a settlement and release agreement for a damages claim
  • GST and tutoring service – whether GST payable on the supply of tutoring services to students
  • GST and sale of diesel imported from overseas – whether GST payable on diesel sold to resident customer where diesel imported from overseas and delivered to customer in Australia
  • GST and supply of assessment services – whether GST payable on the supply of assessment services to registered training organisations
  • GST and reimbursement – whether the entity is required to impose GST on the GST inclusive or exclusive costs it incurs and passes on to its clients
  • GST and sale concluded overseas – whether GST payable on sale of equipment concluded while entity overseas where the equipment is to be imported by buyer but payment is made to entity in Australia

Creditable acquisitions

Real property

GST-free supplies

  • GST and food – whether GST payable on supply of food products within a food court
  • GST and counselling services – whether supply of counselling services GST-free pursuant to s 38-10(1)(a) of the GST Act
  • GST and food – whether supply of an uncooked and frozen food product to third parties for on-sale to consumers GST-free
  • GST and supply of cosmetic treatment – whether the supply of cosmetic treatment, including botox injections, GST-free or taxable
  • GST and supplies of food products – whether the sale of fillings to third parties for on-sale to consumers GST-free or taxable
  • GST and food additive – whether the supply of a food additive is taxable or GST-free
  • GST and food – whether sale of food product not marketed as a prepared meal is GST-free
  • GST and dessert – whether the supply of a dessert is GST-free
  • GST and services provided to aged or disabled clients – whether the entity is making GST-free supplies under ss 38-30(3) of the GST Act when it provides personal care services under a direct arrangement with an aged or disabled person who receives no funding and also under an arrangement where funding is received
  • GST and supply of visa application services – whether the supply of visa application services to a non-resident who is not in Australia when the services are performed GST-free
  • GST and food – whether the supply of food product (which can be sold as confectionary or used in making confectionary) is GST free
  • GST and treatment of supplies of precious metals – whether supplies of precious metals, after refinement, constitute the first supply in accordance with paragraph 38-385(a) of the GST Act
  • GST and refunds of overpayments – whether the Commissioner will exercise his discretion in s 105-65 of Schedule 1 to the TAA to refund the amount of overpaid GST where a decreasing adjustment available
  • GST and refund of GST – whether the Commissioner will exercise his discretion in s 105-65 where GST was incorrectly included in the price of a non-taxable supply – GST incorrectly included in price of attendance fee for clients attending preschool education services
  • Refund of GST – whether Commissioner will exercise discretion where entity incorrectly accounted for GST in activity statements for GST-free supplies but no GST was charged to customers


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