Private Rulings – August 2012

In August 2012 the Commissioner published over 40 private rulings dealing with GST on the Private Rulings register.

Of particular interest were private rulings dealing with the GST implications of Executors Commission and the perennial issue of GST refunds.

Private Ruling No.1012201810746 dealt with the question of whether GST was payable on executors commission to be received by an executor appointed to administer an estate. The Private Ruling found that GST was payable because the executor was carrying on an enterprise (he was already registered in respect of a farming business) and GST was payable.  While accepting that the appointment was a “one off”, the ruling found that the activity had the characteristics of a business deal and fell within the definition of “enterprise” in the GST Act.

This ruling has important implications for any person who takes an appointment as executor and seeks to recover executors commission.  Where a person is not registered for GST, there will only be an issue where the turnover threshold of $75,000 is exceeded.  However, where a person is registered (albeit in respect of a totally unrelated enterprise – in the case of the private ruling, the applicant was registered as a farmer), that person will be potentially exposed to a GST liability of 1/11th of the Commission.  This also raises the question of whether the Commission can be “grossed up” for the GST liability and whether the Estate should (or can) be registered for GST so that it can claim an input tax credit in respect of the GST.

Private Ruling No.1012202126278 dealt with the GST treatment of an out of court settlement payment and whether the Commissioner would exercise its discretion in s 105-65 of Schedule 1 to the TAA to refund the overpaid GST.  In the private ruling, the Commissioner confirmed that the payment was not subject to GST and that “on balance” the Commissioner would exercise the discretion to pay a refund of GST because he was satisfied that the settlement amount was set without taking GST into account and the applicant made a later decision to treat the amount as consideration for a taxable supply, meaning that the overpaid GST was not passed on to the recipient and the burden of the GST was borne by the applicant.

Last month the Treasurer released a controversial exposure draft for introduction of Division 36 into the GST Act, which is to replace s 105-65 of Schedule 1 to the TAA.  My post on the exposure draft can be accessed here and my analysis of the new provisions can be accessed here.  Under the new provisions, the same result would occur because the Commissioner accepted that no part of the overpaid GST was passed on to the recipient.

It is interesting that in the private ruling, no tax invoice was given to the recipient.  Under the proposed changes, if a tax invoice had been provided (which the applicant would have been required to do under the GST Act if required by the recipient), this would have provided “prima facie evidence” of the GST being passed on to the other entity.  In these circumstances, it is difficult to see how the mere fact of the provision of a tax invoice can potentially convert a situation where GST is not passed on, to one where GST is passed on.


Taxable supply

  • GST and out of court settlement payment – whether GST payable when receive out of court settlement payment re  fraudulent acts of agent re the original supply agreement between the parties – whether Commissioner will exercise discretion to refund GST mistakenly paid by applicant on the proceeds
  • GST and ATM fees and services – whether services fees paid to unregistered ATM owner subject to GST
  • GST and executors commission – whether GST payable on executors commission – whether carrying on enterprise

Creditable acquisitions

  • GST and electricity for staff accommodation – whether making a creditable acquisition of electricity provided to staff accommodation premises in remote area – whether making a taxable supply when on-charge electricity to employees occupying staff accommodation – whether entitled to input tax credits when reimburse employee’s expenses for electricity used in staff accommodation – whether supply of electricity relates to input taxed supply of residential premises
  • GST and entitlement to input tax credits – whether a government department can claim input tax credits for payments made to transport operators under certain travel subsidy schemes
  • GST and cash carrying services – whether a bank is entitled to claim reduced input tax credits for the acquisition of cash transfer services (transfer of cash to and from ATMs located in premises not operated as a branch of the bank); cash transfer services (transfer of cash between cash depots operated by third parties); cash transfer services (transfer of cash between Reserve Bank and the Mint to depots operated by third parties).
  • GST and purchase of a business as a going concern – whether the purchase of a business a creditable acquisition
  • GST and the sale of a rent roll business – whether the acquisition of a rent roll business a creditable acquisition or a supply of a going concern

GST-free supplies

Real property

  • GST and the sale of farmland – whether liable to pay GST on sale of farmland
  • GST and commercial residential premises – whether making a taxable supply of commercial residential premises when supply a portion of premises (consisting of rooms with ensuite, communal kitchen and communal lounge room) to an unrelated entity
  • GST on the sale of a property – whether the supply of a disused commercial building owned by unregistered entities will be subject to GST – whether enterprise carried on
  • GST and sale of land – whether GST will be payable on the sale of vacant land – whether can use margin scheme
  • GST and partnerships – whether interest in commercial property by Trust 1 an interest in a partnership that requires separate registration – if not a partnership, can Trust 1 account for its share of the supplies and acquisitions made in respect of the property under its own ABN
  • GST and enterprise – whether carrying on an enterprise where subdivision and sale of residential land, some vacant and some with houses constructed
  • GST and commercial residential premises – whether making taxable supply of commercial residential premises when supply accommodation leased from third party to employees
  • GST and sale of vacant land – whether GST can be calculated on residential allotments using the margin scheme – where land purchased as taxable supply and input tax credit claimed
  • GST and the sale of property – whether the supply of the residential space in a building an input taxed supply, whether the supply of the remaining commercial part of the building a going concern
  • GST and sale of land – whether the supply of farm land and rental property a taxable supply or partly an input taxed supply – whether land area is a reasonable apportionment method
  • GST and supply of land and forest vegetation – whether supply of land by lease a GST-free supply of farmland


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