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Administrative Appeals Tribunal construes administrators’ entitlement to input tax credits

In a recent case, in which Luke Livingston appeared, the Administrative Appeals Tribunal (Senior Member Olding) considered, for the first time, the proper interpretation of the legislation which governs the entitlements of administrators, receivers and liquidators to claim input tax credits.

In Albarran & Ors as Joint Administrators of Cooper & Oxley Builders Pty Ltd v Commissioner of Taxation [2020] AATA 4325, the question that arose was as follows:  When an entity that accounts for GST on an accruals basis acquires a thing, but subsequently becomes an “incapacitated entity”, and its “representative” who accounts on a cash basis pays for the acquisition, is the incapacitated entity or the representative entitled to an input tax credit for the acquisition?

The answer to that question turned upon the construction of s 58-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) – a provision which had not previously been the subject of any judicial or Tribunal consideration.

The GST Act adopts the label “incapacitated entity” to refer to various insolvent persons and entities, such as bankrupts and companies in liquidation or administration, and “representative” for persons appointed to administer them, such as trustees in bankruptcy, liquidators and administrators. The applicants were appointed as joint administrators of Cooper & Oxley Builders Pty Ltd as trustee for Cooper & Oxley Builders Unit Trust.

The Commissioner submitted that the requirement in s 58-10(1), that “the making of the supply, importation or acquisition … is within the scope of the representative’s responsibility or authority for managing the incapacitated entity’s affairs”, means that s 58-10(1) may only apply if the supply, importation or acquisition was made during the period of the administrators’ appointment.

The administrators submitted that the Commissioner’s approach erroneously confined s 58-10(1) to acquisitions occurring after the representative’s appointment and, in so doing, impermissibly imported a temporal requirement not found in the language of the section.

After a careful analysis of text, context and purpose, the Tribunal preferred the former construction. The Tribunal held that a construction confining s 58-10 to supplies and acquisitions actually made by the representative reflected the more natural reading of the provision and was coherent with the scheme of the GST Act in relation to GST on taxable supplies and income tax credits on creditable acquisitions and their attribution to tax periods.

Accordingly, the Tribunal concluded that s 58-10(1) only applies in respect of supplies and acquisitions in fact made by a representative of an incapacitated entity (within the scope of their appointment), as opposed to supplies and acquisitions of a kind that the representative is authorised to make or responsible for making, as an aspect of managing the incapacitated entity’s affairs.

A copy of the Tribunal’s reasons may be found here.

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