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25 Mar 15 Trustee not an incapacitated entity for GST purposes – Re Anderson

The Administrative Appeals Tribunal has found that the trustee of a trust with a GST liability was not an incapacitated entity for purposes of GST law, and that the retirement of an individual as trustee did not affect the liability of the trustee in that capacity; the trustee of the trust remained liable to pay GST.

Mr Anderson was a trustee of a trust which owned a parcel of land that was subdivided in the course of a commercial development. A number of the lots were sold during 2009. The sales were taxable supplies for the purposes of the GST Act. The parties agreed the vendor of the property would be liable to pay GST on those supplies in the ordinary course, but the vendor did not pay GST in respect of the sales of two lots in particular. The development project ran into financial difficulties, and there was a mortgagee in possession. The lots in question were sold by the trustee with the mortgagee’s consent.

Mr Anderson said the liability to pay did not arise, and should not fall on him in particular, for two reasons, namely, that the trustee was an incapacitated entity for the purposes of the GST Act, and he retired as trustee on 9 December 2009.

Was the trustee an incapacitated entity for the purposes of the legislation? The expression “incapacitated entity” is defined in s 195.1 of the GST Act as: (a) An individual who is a bankrupt; or (b) An entity that is in liquidation or receivership; or (c) An entity that has a representative. Mr Anderson was an individual, he could not be placed in liquidation or receivership, and he was not a bankrupt. Nor did he have a representative. He was not an incapacitated entity.

Was the trustee’s liability affected by Mr Anderson’s purported retirement as trustee? The Tribunal noted that s 184.1(2) of the GST Act provides that: “The trustee of a trust or of a *superannuation fund is taken to be an entity consisting of the person who is the trustee, or the persons who are the trustees, at any given time.” One consequence of this approach is a form of perpetual succession in which the entity and its liabilities live on even though the individuals associated with the entity come and go. This meant that the trustee remained liable for GST.

On the evidence, Mr Anderson was still the trustee when the lots in question were sold. He was therefore liable in his capacity as trustee for the GST payable on those sales. He was not liable for GST on sales made after his retirement as trustee.

Re Anderson and FCT [2015] AATA 167 (Bernard J McCabe, Senior Member, 23 March 2015).

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