A recent decision in the case of DCT v PM Developments Pty
Ltd (PM Developments) has confirmed that while a company in
liquidation is liable for GST payable on any taxable supply, a
liquidator is not personally liable for GST incurred on post-
In response the government has issued a statement that it
intends to amend the GST legislation to make liquidators personally
liable for GST on post- appointment transactions.
The relevant question decided in this case was:
"Is a liquidator of a
corporation personally liable for GST in respect of the sale of new
residential premises owned by the corporation pursuant to a
contract for the sale of those premises entered into and completed
after the making of the winding up order?"
The Commissioner of Taxation (the Commissioner) relied on s147
of A New Tax System (Goods and Services Tax) Act 1999 (GST
Act) which sets out the requirements for representatives of
incapacitated entities to register for GST. His Honour considered a
number of submissions about the construction of the GST legislation
as a whole and how s147 should be read.
His Honour weighed the clarity of s147 against the general
position of liquidators, highlighting that in liquidation (unlike
in bankruptcy) the property of the company never vests in the
liquidator, and although control of the company changes, beneficial
ownership of company assets remains with the company.
The Court found that s147 was insufficient to create a personal
liability on the part of the liquidator as the requirement to
register in s147 only brought the liquidator within one of four
elements that cumulatively form a 'taxable supply' for GST
purposes (s9-5), placing emphasis on the fact that to find
otherwise would be counter intuitive to the general law of
The Court also found that the GST was a priority payment under
s556(1)(a) of the Corporations Act, ranking equally with
other post-liquidation debts, and as such a direction was made that
the GST be paid proportionately (subject to liens) by the
liquidator as there were insufficient funds to discharge all
priority payments in full.
Proposed amendments to GST legislation
In response to the decision in PM Developments the Assistant
Treasurer has recently issued a media release stating that
"the Court's finding is contrary to the underlying
policy intention and the way the law has been administered since
the introduction of the GST".
The proposed amendments are to be retrospective in operation and
will apply from the introduction of the GST Act on 1 July 2000. The
amendments will apply to all 'representatives' of
incapacitated entities, and are aimed at reversing the decision in
The definition of 'representative' as the GST Act
currently stands includes the following: a trustee in bankruptcy, a
liquidator, a receiver, a manager, an administrator appointed to an
entity under Division 2 of Part 5.3A of the Corporations Act
2001, and an administrator of a deed of company arrangement
executed by the entity.
Message to insolvency practitioners
If the proposed amendments are made, insolvency practitioners
who fall within the definition of representatives will be
personally liable for GST that is incurred post appointment, and
rather than ranking as an equal post-liquidation debt, the
Australian Taxation Office will be likely able to recover the whole
of the GST payable on post appointment transactions from the
representative. This will likely not come as a surprise to most
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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