6 February 2009

GST and Incapacitated Entities

The Assistant Treasurer Chris Bowen MP announced today that the Government will amend the GST law, with effect from 1 July 2000, to ensure that representatives of incapacitated entities are liable for GST on post-appointment transactions.

The Government will shortly release and consulton draft legislation to implement this tax measure.

The Federal Court found in Deputy Commissioner of Taxation v PM Developments Pty Ltd [2008] FCA 1886 that the GST liability for a transaction occurring during the period of the representative's appointment is the liability of the company in liquidation rather than the liability of the representative.

"The Court's finding is contrary to the underlying policy intention and the way the law has been administered since the introduction of GST. In the interests of providing certainty for all representatives of incapacitated entities, the Government is announcing today its intention to amend the GST law to restore the status quo," Mr Bowen said.

"The amendments will apply from the commencement of the GST law [1 July 2000] and restore the policy intent stated in the Explanatory Memorandum to the law introducing GST. The amendments will also ensure that refunds are not available where the correct amount of GST has been paid in respect of transactions occurring during the period of the representative's appointment.

'"Ensuring that the representative of an incapacitated entity is liable for GST on taxable transactions during their period of appointment will provide certainty and minimise potential complexities arising from the Court's decision for both representatives and the administration of the law."

The amendments will be introduced into Parliament at the earliest possible opportunity after consultation on the draft legislation has taken place.