ATO Private Rulings – December 2011

In December 2011 the ATO published more than 50 private rulings dealing with GST.

Some of the more interesting rulings are discussed below, dealing with bare trusts and refunds.

GST and charitable property trusts – Ruling no 1011991811094

  • this private ruling request was made by a State Trustee (being an unincorporated association that acts as the State arm of the organisation) -the functions of the State Trustee included providing trustee services to local branches in regard to real property.  In such circumstances, charitable property trusts were established for the benefit of local branches whereby the State Trustee, or a specific purpose corporate trustee, acts as trustee
  • the facts relevant to the arrangements can be stated as follows:
  1. the State Trustee enters into contracts to acquire real property as trustee to hold the property for the public charitable purposes of the local branch
  2. the terms of the trust usually oblige the State Trustee to act on the direction of the local branch (the controller)
  3. the State Trustee is normally passive in the trust arrangement with the costs and management of the real property being met and carried out by the local branch
  • the issue sought to be addressed in the ruling was whether the relevant entity for the purposes of GST was the State Trustee or the beneficiaries (with the State Trustee acting as bare trustee).  In finding that the State Trustee was not acting as a bare trustee, the ATO accepted that the terms of the trust deed required the State Trustee to deal with the property in accordance with the instructions of the local branch, the trust deed conferred considerable powers on the State Trustee to act independently of the local branch and, in certain circumstances, was required to act in accordance with the direction of the State Executive.
  • In taking this view, the ATO relied on GSTR 2008/3 dealing with bare trusts,and referred to the following paragraphs:
37. The activities of a bare trustee are essentially passive in nature.  A trustee of the type of trust considered in this Ruling has either no active duties to perform or only minor active duties.  A bare trust as that term is used in this Ruling does not carry on an enterprise for GST purposes by virtue of its dealings in the trust property.
39. If the asset is sold, the transaction will involve a transfer of the legal title to the property to a third party by the trustee at the direction of the beneficiary.
  • Without having an opportunity to review the terms of the trust deed, but having regard to the terms of the trust deed outlined in the private ruling, I have some concerns with the ATO view.
  • The judicial approach to “bare trust” focuses on the absence of any duties of management on the trustee and the ability of the beneficiary to compel the trustee to transfer the trust estate to them: see Christie v Ovington (1975) 1 Ch D 279 at 281; Morgan v Swansea Urban Sanitary Authority (1878) 9 Ch D 582 at 585; Schalit v Nadler [1933] 2 KB 79; Herdegen v FCT (1988) 84 ALR 271 at 282. The “powers” of the State Trustee relied on by the ATO (which include powers to sell, lease and mortgage the property) could arguably be seen to be administrative mechanisms whereby the directions of the local branch can be given effect to, rather than facilitating the lawful independent action of the State Trustee.
  • While it is true that, taken literally, some of the powers relied on by the ATO may give the State Trustee the “power”, or the capacity, to act independently of the local branch (for example in selling the property) – one must always consider whether such a power would be a lawful act of the trustee.  As noted at paragraph 12 of GSTR 2008/3, “the key point is that the trustee only acts at the direction of the beneficiary in respect of the relevant dealings win the trust property and has no independent role in respect of the trust property” – in this ruling application, one may have cause to question whether the State Trustee did have the lawful capacity to undertake an independent role in respect of the trust property.
  • the issues in this private ruling application were whether the supply of online content by an overseas company (OSCo) to Australian consumers was subject to GST free, and if not, whether the ATO would pay the GST refund to OSCo in light of s 105-65 of Schedule 1 to the TAA – the private ruling found that the services were not subject to GST, but that no refund would be paid because the discretion in s 105-65
  • in support of the refund application, given that the Australian consumers were not registered for GST and the consumers had not been reimbursed for the overpaid GST, the matters relied on included:
  1. the RRP for the price was the same, regardless of whether the customers were located in territories that imposed GST/VAT;
  2. the GST/VAT was not factored into the RRP
  3. OSCo sets its RRP and then recognises its revenue after any applicable GST or VAT was deducted
  4. the consumer pays the RRP, whether or not GST applies to the transaction, and does not bear the cost of the GST
  5. giving a refund to costumers would be a windfall gain to an ‘undeserving consumer’ as referred to by the Tribunal in Luxottica Retail Australia Pty Ltd v Commissioner of Taxation [2010] AATA 22
  • In finding that the refund should not be paid, the first point to note is that the ATO characterised the discretion in s 105-65 as effectively relieving the Commissioner from any obligation to refund the overpaid GST, but nevertheless  giving the Commissioner a residual discretion to pay the refund.  That approach appears to be contrary with the recently stated view of the President of the Tribunal (sitting with Senior Member O’Loughlin), that the discretion  is to “not pay” the refund: see MTAA Superannuation Fund (RG Casey Building) Property Pty Ltd and Commissioner of Taxation [2011] AATA 769 at [65] and National Jet Systems Pty Ltd and Commissioner of Taxation [2010] AATA 766 at [79].
  • The second point to note is that the private ruling gives an insight into the limited circumstances in which the ATO will allow refunds to be paid, where the transactions involve consumers who are not registered for GST – in this regard, the presumption is that the cost of GST is a foreseeable cost that is passed on as part of the cost recovery and pricing structure of the supplier and it would appear that only in very limited circumstances will a supplier be able to satisfy the Commissioner that the overpaid GST has not been passed on.


Taxable supply

  • GST and out of court settlements – settlement of claim by third party against sale of property between vendor and purchaser – whether GST payable on settlement sum paid to purchaser of property by third party claimant
  • Application of GST to subsidy payments, reimbursements and administration fees – GST treatment of payments between Entity A (a State government agency) and Entity B (a Commonwealth government agency) for the delivery of subsidies to eligible applicants under Commonwealth scheme
  • GST and charitable property trusts – whether State Trustee liable for GST re transactions in relation to transactions in relation to the trust property where acting for the benefit of local branches – whether acting as bare trustee
  • GST and warranty repair services – whether payments from non-resident manufacturer to Australian distributor for warranty repair services carried out in Australia under warranty given by non-resident manufacturer subject to GST
  • GST and reimbursement of expenses – whether GST payable on reimbursement received by A from B for expenses incurred by A as agent for B
  • GST and software support services – whether the supply of software support services to Australian customers on behalf of overseas company subject to GST
  • GST and a share of profits – whether profit share paid to entity subject to GST

Creditable acquisitions


GST free supplies

Real Property

GST refunds

Incapacitated entities


  • Date of effect of GST registration – whether date of registration to be the date specified in application or earlier date which required to be registered for GST
  • GST and enterprise – whether unit trust carrying on an enterprise and required to be registered – whether ‘passive conduit vehicle’ to hold shares for third party and to ‘pass through’ loans


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