Recently the Federal Court held that the liquidator of PM
Developments Pty Ltd (PMD) was not liable for the GST payable on
the sale of property pursuant to a contract made after the
liquidator's appointment. This meant that the GST liability
would be regarded (for distribution purposes) as any other
unsecured debt and paid accordingly, which would often result in a
short fall of GST paid to government.
PM Developments Pty Ltd (PMD) was ordered to be wound up. Mr
John Greig (Deloittes) was appointed the sole liquidator of
Mr Greig, in his capacity as liquidator, sold a residential unit
in the course of the liquidation. It was accepted that the supply
was a taxable supply of new residential premises. The issue was
whether the GST liability arising from the supply was that of PMD
or the liquidator.
Decision Handed Down
The Federal Court held that the liquidator was not liable for
the GST payable on the sale pursuant to a contract made after the
liquidator's appointment, and that the liquidator had no
liability for general interest charges in relation to the
incapacitated company's GST liability. The case turned on the
legal distinction that the assets of a company were not vested in
the liquidator but were administered by the liquidator as agent. By
inference, if the assets were vested (ie in a trustee in bankruptcy
or mortgagee in possession) the representative of the incapacitated
entity would be personally liable for GST.
The Assistant Treasurer issued a press release "GST and
Incapacitated Entities" on 6 February 2009 announcing
that the GST Act would be amended to ensure that liquidators (and
other representatives of incapacitated entities) are personally
liable for GST upon taxable supplies being made in the course of
administering incapacitated entities. The government considers that
the amendment is necessary to bring the GST Act in line with the
intent of original policy.
The proposed amendments are to apply retrospectively from 1 July
The Australian Tax Office (ATO) in a
"Decision Impact Statement" issued 9 February
2009 on PMD has reaffirmed the Treasury's announcement and has
advised that any GST owing by representatives of incapacitated
entities, as a result of the proposed changes to the GST Act, will
be personally liable. The ATO has advised that penalties and GIC
will not be payable provided the GST liability is satisfied before
the 28th day after the amending Bill receives Royal Assent.
The ATO has asked for feedback on the proposed administrative
Clearly, as the proposed changes to the GST Act will apply
retrospectively, liquidators or other representatives of
incapacitated entities may have an unfunded exposure to GST if they
did not remit GST to the ATO for taxable supplies. It is our
understanding that most liquidators have regarded GST as a
personally liability, however, with the proposed changes it is
clear that the ATO will have a greater focus on the winding up of
incapacitated entities to check past compliance.
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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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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