The Government has announced that it will amend the GST law, with retrospective effect from 1 July 2000, to ensure that liquidators and receivers are liable for GST on post-appointment transactions.
The amendments are in light of the recent Federal Court decision in Deputy Commissioner of Taxation v PM Developments Pty Ltd [2008] FCA 1886. In that decision, the court held that the liquidator was the 'agent' of the insolvent company when it made supplies and acquisitions on the company's behalf. This meant that the GST payable in relation to the sale of that company's assets was the liability of the company (not the liquidator) and therefore ranked equally with the other post liquidation debts.
The Government's proposed retrospective amendments will override the decision in PM Developments to ensure that the liquidator, or receiver, is treated as the 'entity' that carries on the company's enterprise during the period of appointment.
If the proposed amendments operate retrospectively, as announced, then insolvency practitioners who had correctly adopted an approach consistent with the views of the court in PM Developments will be exposed to a back-dated liability for GST on supplies made after the GST commenced (or at least during the past four years). This could be devastating where the liquidator or receiver no longer controls the assets of the company.
If it proceeds (as seems likely), this amendment will enshrine the unjust position that the ATO becomes a defacto first ranking charge holder over the assets of a company in receivership or liquidation. It means that secured creditors are in a substantially different position depending on whether the company sells assets before or after a controller is appointed. Gadens has lobbied against this unfair result and will continue to do so. This situation highlights the benefits of using Gadens' ADS systems (Alternate Default Strategies) which have a long history of producing better results for lenders.
The precise details of the new measures have not been released. However, the Government has announced that it will release draft legislation for consultation purposes in the near future.
| Sydney | ||
| Cameron Steele | t +61 2 9931 4738 | e ccachia@nsw.gadens.com.au |
| Martin Hirst | t +61 2 9931 4871 | e mhirst@nsw.gadens.com.au |
| Brisbane | ||
| Sarah Toohey | t +61 7 3114 0124 | e stoohey@qld.gadens.com.au |
| Dan Pennicott | t +61 7 3114 0102 | e dpennicott@qld.gadens.com.au |
| Adelaide | ||
| James Marsh | t +61 8 8233 0662 | e jmarsh@fisherjeffries.com.au |
| Wendy Jones | t +61 8 8233 0645 | e wjones@fisherjeffries.com.au |
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