Richard Albarran, Brent Kijurina and Cameron Shaw as Joint Administrators of Cooper & Oxley Builders Pty Ltd as trustee for the Cooper & Oxley Builders Unit Trust and Commissioner of Taxation (Taxation) - [2020] AATA 4325

Richard Albarran, Brent Kijurina and Cameron Shaw as Joint Administrators of Cooper & Oxley Builders Pty Ltd as trustee for the Cooper & Oxley Builders Unit Trust and Commissioner of Taxation (Taxation) [2020] AATA 4325 (30 October 2020)
Division:SMALL BUSINESS TAXATION DIVISION
File Number(s): 2020/0154
Re:Richard Albarran, Brent Kijurina and Cameron Shaw as Joint Administrators of Cooper & Oxley Builders Pty Ltd as trustee for the Cooper & Oxley Builders Unit Trust
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION
Tribunal:Senior Member R J Olding
Date:30 October 2020
Place:Sydney

The decision under review is affirmed.
..............................[SGD]..........................................
Senior Member R J Olding
CATCHWORDS
TAXATION – GOODS AND SERVICES TAX – input tax credits – representatives of incapacitated entities – whether administrators entitled to input tax credits – where acquisitions made by an incapacitated entity but consideration provided by administrators – held administrators not entitled to input tax credits – decision affirmed
LEGISLATION
A New Tax System (Goods and Services Tax Act) 1999 (Cth), Div 29; ss 9-5, 9-40, 11-20, 58-1, 58-10, 58-40, 195-1
Corporations Act 2001 (Cth), ss 435A, 437B
Taxation Administration Act 1953 (Cth), Sch 1, s 260-45
CASES
Deputy Commissioner of Taxation v PM Developments Pty Ltd (2008) 173 FCR 247
SECONDARY MATERIALS
Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 8) 2000 (Cth)
Explanatory Memorandum to the Tax Laws Amendment (2009 Measures No. 5) Bill 2009 (Cth)
James O’Donovan, Company Receivers and Administrators, Thomson Reuters
REASONS FOR DECISION
Senior Member R J Olding
30 October 2020

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 (“ITC”) for the acquisition?
The answer to that question - which turns upon the proper construction of section 58-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (“GST Act”) - will determine the fate of this application for review.
BACKGROUND
The Applicants, who to avoid confusion I will call “the Administrators”, were appointed as Joint Administrators of Cooper & Oxley Builders Pty Ltd as trustee for Cooper & Oxley Builders Unit Trust (“the Company”) in February 2018.
In that capacity, they were required to lodge an activity statement for March 2018, which they did on 22 June 2018. As they had elected to account for GST on a cash basis, the Administrators claimed ITCs on acquisitions made by the Company in January 2018 (“the Acquisitions”), which the Administrators had paid for in March 2018.
On 25 May 2018, under the terms of a Deed of Company Arrangement, control of the Company was returned to its former directors. On 15 June 2018, the directors caused the Company to lodge an activity statement for January 2018. As it accounted for GST on an accruals basis, the Company claimed ITCs for the Acquisitions for which it had been invoiced in January 2018.
The Commissioner of Taxation (“the Commissioner”) assessed the Administrators’ net amount for the March 2018 tax period on the footing that the Company, not the Administrators, is entitled to the ITCs. The Administrators objected to the assessment. The Commissioner allowed the objection in part but maintained the position that the Administrators were not entitled to the ITCs. The amount of the ITCs remaining in contention, totalling $329,256, is not in dispute, only whether the Administrators are entitled to them.
The Administrators have applied for review of the objection decision.
STATUTORY FRAMEWORK AND HISTORY
Role of an administrator
The objective of providing for appointment of an administrator to an insolvent company is to allow for its affairs to be administered in a way that maximises the chances of the company or its business to continue in existence or if that is not possible results in a better return to creditors and shareholders than would result from an immediate winding up: Corporations Act 2001 (Cth) (“Corporations Act”), section 435A.
The role of a company administrator is specified in section 437A of the Corporations Act. Essentially, the administrator has control of the company’s affairs and may carry on its business. The administrator may perform any function, and exercise any power, the company or its officers could perform or exercise if the company were not in administration.
When performing those functions or exercising those powers, the administrator is taken to be acting as the company’s agent: Corporations Act, section 437B. It is not in dispute that, when paying the consideration for the Acquisitions, the Administrators were acting consistently with the objects of the appointment of administrators and within the scope of their appointment.
Entitlement to and attribution of ITCs – the general rules
The general rule regarding entitlement to ITCs, as stated in section 11-20 the GST Act, is:
11-20 Who is entitled to input tax credits for creditable acquisitions?
You are entitled to the input tax credit for any *creditable acquisition that you make.
Thus, under the general rule, the entity that makes an acquisition enjoys any ITC entitlement. Such ITCs are “attributed” to a tax period, meaning that they may be claimed in the entity’s activity statement for that period. The general rules vary according to whether the entity accounts for GST on a cash basis or a basis other than cash, commonly referred to as the accruals basis:
(a)accruals – the ITC is attributed to the tax period in which the taxpayer provides any of the consideration for the acquisition or an invoice is issued, whichever occurs first;
(b)cash basis – the ITC is attributed to a tax period to the extent to which the taxpayer pays the consideration in that period.[1]
[1] GST Act, Division 29.
It is common ground that the Company made the Acquisitions. The Administrators do not argue that they made any acquisitions relevant to the ITCs.
There are corresponding rules for GST on taxable supplies, which have the effect that the entity that makes the supply is liable for the GST, which is attributed to a tax period according to whether the entity accounts for GST on an accruals or cash basis.[2]
[2] GST Act, s 9-40; Division 29.
However, these general rules may be displaced by special rules.
Special rules for “incapacitated entities”
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.[3] It is common ground that the Company was an incapacitated entity during the administration and the Administrators were its representatives.
[3] GST Act, s 195-1.
As originally enacted, the GST Act contained Division 147, the apparent policy objective of which was for representatives to have the GST liabilities and entitlements in relation to supplies and acquisitions made in their representative capacity. However, as Deputy Commissioner of Taxation v PM Developments Pty Ltd[4] revealed, that objective was not achieved where, under the general law, the representative acted as agent for the incapacitated entity, such that the incapacitated entity rather than the representative made the relevant supply or acquisition.
[4] (2008) 173 FCR 247.
Consequently, an amendment was enacted in 2009 to repeal Division 147 and insert the current Division 58. Under section 58-5 in that Division, a supply or acquisition by a representative of an incapacitated entity in that capacity is taken to be made by the entity and not the representative. This has the effect that generally transactions have the same GST consequences – GST liabilities and ITC entitlements – as if the incapacitated entity had continued without a representative appointed. However, for transactions within the scope of the representative’s authority, section 58-10 generally allocates those liabilities and entitlements to the representative.
Section 58-10 of the GST Act relevantly provides:
58‑10 Circumstances in which representatives have GST‑related liabilities
and entitlements
General rule
(1) A *representative of an *incapacitated entity:
(a) is liable to pay any GST that the incapacitated entity would, but for this section . . . be liable to pay on a *taxable supply or *taxable importation; and
(b) is entitled to any input tax credit that the incapacitated entity would, but for this section . . . be entitled to for a *creditable acquisition or a *creditable importation; and
(c) has any *adjustment that the incapacitated entity would, but for this section . . . have;
to the extent that the making of the supply, importation or acquisition to which the GST, input tax credit or adjustment relates is within the scope of the representative’s responsibility or authority for managing the incapacitated entity’s affairs.
Exceptions for certain taxable supplies
(2) This section does not apply to the GST payable on a *taxable supply to the
extent that one or more of the following apply:
(a) the *incapacitated entity received the *consideration for the supply before
the *representative became a representative of the incapacitated entity;
. . .
Exception for certain creditable acquisitions
(3) This section does not apply to an input tax credit for a *creditable acquisition to the extent that the *incapacitated entity provided the *consideration for the acquisition before the *representative became a representative of the incapacitated entity.
. . .
(5) An incapacitated entity . . .:
(a) is not liable to pay GST on a *taxable supply or a *taxable importation to the extent that a *representative of the incapacitated entity is liable under this section to pay the GST on the supply or importation; and
(b) is not entitled to the input tax credit for a *creditable acquisition or *creditable importation to the extent that a representative of the incapacitated entity is entitled under this section to the input tax credit on the supply or importation

(Emphasis added.)
Since it was submitted that it provides relevant context for the construction of section 58-10, it is also desirable to set out section 58-40(1) of the GST Act:
58-40 Effect on attribution rules of not accounting on a cash basis
(1) If:
(a) a * representative of an * incapacitated entity does not * account on a cash basis; and
(b) because of section 58-10, all or part of the amount of GST payable on a * taxable supply is payable by the representative, or the representative is entitled to all or part of the input tax credit for a * creditable acquisition;
then, to the extent that, but for this section, the GST or input tax credit would be attributable to a tax period that ended before the representative became a representative of the incapacitated entity, the GST or input tax credit is instead attributable to the first tax period applying to the representative in that capacity.
CONSIDERATION
Construction issue for determination
As the words in section 58-10(1) highlighted above indicate:
[a] *representative of an *incapacitated entity . . . is entitled to any input tax credit that the incapacitated entity would, but for this section . . . be entitled to for a *creditable acquisition… to the extent that the making of the . . . acquisition to which the . . . input tax credit . . . relates is within the scope of the representative’s responsibility or authority for managing the incapacitated entity’s affairs.
It is common ground that the Company would be entitled to ITCs on the Acquisitions but for section 58-10(1) on the basis that the Company made the Acquisitions and was liable to provide the consideration for the Acquisitions. Thus, the question for determination is whether the Acquisitions satisfy the requirement that:
the making of the [Acquisitions] to which the . . . [ITCs] . . . relate is within the scope of the [Administrators’] responsibility or authority for managing the Company’s affairs.
The parties’ submissions
It is also common ground that the Administrators and the Company are not each entitled to ITCs on the Acquisitions. The Administrators say they are entitled to the ITCs while the Commissioner says the Company is entitled to the ITCs.
The competing constructions
The Administrators submit that section 58-10 invokes a two-step approach in which the representative asks:
(a)First – What ITCs of the incapacitated entity are attributable to a tax period applying to the representative (which turns on whether the representative accounts for GST on a cash or an accruals basis)?
(b)Second – Whether the making of the acquisition to which that ITC relates is (not was) within the scope of the representative’s responsibility or authority – that is, whether it is an action of a kind that the representative is authorised to make or responsible for making, as an aspect of managing the incapacitated entity’s affairs?[5]
[5] Applicants’ Outline of Submissions, [32].
The Commissioner submits that the requirement that the making of the supply, importation or acquisition is within the scope of the representative’s appointment means that section 58-10(1) may only apply if the supply, importation or acquisition is made during the period of the appointment.
Text
The Administrators say the Commissioner’s approach confines section 58-10(1) to acquisitions occurring after the representative’s appointment and in so doing impermissibly imports a temporal requirement not found in the language of section 58-10(1). They submit that it is contrary to the ordinary meaning of section 58-10(1) to confine the application of section 58-10 to acquisitions made by an incapacitated entity after the appointment of a representative. They support this by reference to textual, as well as contextual and policy, considerations.
The primary textual consideration to which the Administrators draw attention is that section 58-10 is expressed in the present tense. In particular, the Administrators emphasise the use of the present tense “is” in the language of the requirement for the relevant acquisition (or supply or importation) to be within the scope of the representative’s appointment: “. . . the making of the supply, importation or acquisition . . . is within the scope of the representative’s responsibility or authority . . .”. The verbal noun requiring the “making” of the acquisition to have the requisite quality is in the same tense. Generally, section 58-10 is not cast in terms of temporal requirements.
These features, the Administrators say, indicate the drafter’s objective was “to describe the qualities of the ‘making’ of the acquisition necessary to bring about the consequences for which s 58-10(1)(b) provides, rather than to circumscribe that sub-section by a temporal limitation”. Putting it another way, the Administrators say the concluding words of section 58-10(1) identify a class of activity rather than signify the time period in which the activity must occur.[6]
[6] Applicants’ Outline of Submissions, [35].
The difficulty with the Administrators’ submission is, with respect, that it sets up a false contest regarding whether section 58-10(1) inferentially contains a temporal limitation. It may be accepted that it does not. It may also be accepted that it identifies a class of activity rather than a time period in which the activity must occur. The class of activity is the making of a supply, importation or acquisition within the scope of the representative’s appointment. However, contrary to the Administrators’ submission, in my view that conclusion does not mean the Commissioner’s construction requires the reader to impermissibly construe section 58-10(1) as if it continued “at the time that the supply, importation or acquisition is [or was] made”.
Perhaps the ordinary meaning of language is in the eye of the beholder. For my part, the ordinary meaning of section 58-10(1) requires that it is the Administrator that makes the acquisition (or supply or importation, as the case may be). That construction in my view conforms comfortably with the statutory language requiring that the making of the acquisition (or supply or importation) is within the scope of the representative’s responsibility or authority. Mr Livingston, who appeared for the Administrators, submitted that this amounts to an impermissible gloss because section 58-10(1) speaks of “the making” of the acquisition, rather than who made the acquisition. In my view, even focussing on “the making” of the acquisition, the ordinary meaning is that such making is by the representative in accordance with the representative’s authority and responsibility under the terms of their appointment.
Further, it is the Administrators’ construction which, with respect, seeks to import a concept not found in the statutory language by turning the focus upon whether the supply, importation or acquisition is an action “of a kind” that the representative is authorised to make or responsible for making. The use of the definite article in the relevant part of section 58-10(1), where it speaks of the making of the supply, importation or acquisition, focusses attention on the particular supply, importation or acquisition. There is nothing in the language adopted by Parliament to warrant extending the coverage of section 58-10(1) from the class of actions actually identified in the provisions – supplies, importations and acquisitions the making of which are within the scope of the representative’s appointment – to a class of actions which, although not in fact undertaken by the representative, would be within the scope of their appointment if so undertaken.
Legislative context
Divisions 11 and 29 – ITC entitlement and attribution
As noted above, the first step in the Administrators’ proposed two-step process is to identify “what ITCs of the incapacitated entity are attributable to a tax period applying to the representative”, applying the basis for accounting for GST – cash or accruals – adopted by the representative. Then, the Administrators say, one asks whether the making of acquisitions of that kind would be within the scope of the representative’s appointment.
This strikes me as not fitting comfortably with the GST Act’s concepts of GST liabilities and ITC entitlements and the attribution of those liabilities and entitlements to tax periods. The relevant rules already referenced state that the GST payable by an entity or ITC to which an entity is entitled is attributed to a tax period according to whether the entity accounts for GST on an accruals or cash basis. Thus, they contemplate that the GST payable by a taxpayer or the ITC to which the taxpayer is entitled is known and their attribution then falls to be determined in accordance with the attribution rules.
The Administrators’ approach would invert and distort the application of the statutory scheme. Under the general rules, the statutory concept of an ITC does not exist in isolation as an entitlement to be assigned by a provision of the GST Act to an entity. Rather, it exists only as, and is defined[7] as, an entitlement of an entity arising under section 11-20. The Administrators’ approach would first seek to identify ITCs in isolation – not tethered to a particular entity – and then test whether the ITCs so identified relate to transactions that fall within the identified class. An ITC is not a floating entitlement which is assigned to a taxpayer by the statute; it has no statutory recognition other than as an entitlement of a particular entity.
[7] GST Act, s 195-1.
Use of present tense
In my view, the Administrators’ submissions, with respect, overstate the significance of section 58-10 being cast in the present tense when considered in the context of other provisions of the GST Act, particularly those creating the basic rules for determining GST liabilities and entitlements.

It is not necessary to undertake a comprehensive survey of the GST Act. The point is illustrated by reference to the basic provisions relating to imposition of liability for GST and entitlement to ITCs. I have already set out section 11-20 which confers entitlement to ITCs and is expressed in the present tense, but commonly, perhaps most commonly, operates in respect of acquisitions already made. Similarly, section 9-40 imposes GST on an entity for “any *taxable supply that you make”.
In both cases, the liability or entitlement may be attributed to a tax period in advance of or subsequent to the supply or acquisition being made. That is not surprising as the time for accounting for GST obligations and entitlements does not generally depend upon the time a supply or acquisition is made but rather, under the attribution rules, upon the time an invoice is issued and/or the consideration provided. Likewise, under section 58-10, liabilities for GST and entitlements to ITCs do not depend on when a supply or acquisition is made, but rather whether it is made by the representative (and has the requisite character). It may be for those reasons, and for simplicity of expression, that the drafter chose the present tense, which proponents of plain language drafting prefer where appropriate to the meaning to be conveyed and which is adopted elsewhere in the GST Act.
This broader use of the present tense in the GST Act confirms my view that it would give far too much work to this feature of section 58-10 to infer from it that the Administrators’ two-step process is required by section 58-10.
Section 58-40
The Administrators argue that only their construction, and not the Commissioner’s, leaves section 58-40(1) with significant work to do. I agree, if that were so, it would be a powerful contextual indicator favouring the Administrators’ construction. The difficulty with this submission is that section 58-40(1) does have work to do on the Commissioner’s construction.
Circumstances that may enliven section 58-40(1) are:
(a)a representative accounts for GST on an accruals basis;
(b)under section 58-10, the representative is liable for GST on a supply or entitled to an ITC on an acquisition; and
(c)but for section 58-40, the GST or ITC would be attributable to a tax period that ended before the representative’s appointment.
In those circumstances, the GST or ITC is attributed to the representative’s first tax period.
It is readily conceivable[8] that an entity might issue an invoice for a supply or be invoiced by a supplier for an acquisition in one tax period in anticipation of the supply or acquisition being made, but have a representative appointed by the time the supply or acquisition is actually made. But for Division 58, if the entity accounted for GST on an accruals basis, the GST on the anticipated supply or ITC on the anticipated acquisition would be attributed to the entity’s tax period.
[8] Indeed, Mr Slater, who appeared for the Commissioner, referred to this example, with some justification in my view, as the paradigm application of the rule.
However, on the Commissioner’s construction of section 58-10, if the representative made the supply or acquisition after their appointment, the representative would be liable for the GST or entitled to the ITC. The difficulty that would arise, without further provision, is that the liability or entitlement would not be attributed to a tax period arising after the representative’s appointment. In other words, the representative would not have a tax period to which the liability or entitlement could be attributed. On the Commissioner’s construction of section 58-10, that difficulty is remedied by section 58-40.
Thus, contrary to the Administrators’ submission, I do not accept that section 58-40 is rendered otiose on the Commissioner’s construction.
Policy considerations
The Administrators say of their construction of section 58-10:
It aligns the responsibility for the GST consequences of a creditable acquisition or a taxable supply with the person, who, after their appointment, has the responsibility or authority to enter into such a transaction. This ensures that the representative is responsible for the GST consequences which arise during their appointment, including from transactions which occurred in the period leading to their appointment.[9]
[9] Applicants’ Outline of Submissions, [39].
So construed, the Administrators say, section 58-10 serves the rational and practical purpose of ensuring that the individual who is responsible for and authorised to manage the incapacitated entity’s affairs is the same individual to whom GST-related liabilities and entitlements are allocated and by whom they are to be managed. I accept that, as stated and as far as it goes, that could indeed be a rational and practical purpose for Division 58. It has the superficial attraction that all GST obligations arising post-appointment would be the responsibility of the representative.
But it might also be said that the Commissioner’s construction would serve the rational and practical purpose of ensuring that cash receipts generated by representatives in the course of their appointment are not burdened with liabilities that arose not through their own actions but through prior actions of the incapacitated entities to which they are appointed. A sound case can be made for a policy which does not impose on a representative a liability for an act undertaken before their appointment such that the representative had no say in whether the transaction would be undertaken, and the liability thereby incurred.
In the course of the hearing, I raised with counsel whether to do so would, in the case of a corporate winding up, effectively give the Commonwealth priority in respect of a liability incurred (by the making of a taxable supply) before the appointment of the representative. It seems clear[10] that the intention upon introduction of the former Division 147 was to maintain for GST debts the Commissioner’s ranking as a general creditor for tax debts that has applied since the recommendations of the Harmer Report (General Insolvency Inquiry) were enacted in 1993. There is nothing in their text or any extraneous material brought to my attention to indicate the 2009 amendments introducing Division 58 were intended to effect any change in the relative priority of taxation debts.
[10] Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 8) 2000 (Cth), [4.30].
In that regard, I note Logan J’s observation in PM Developments:
38. In the GST Act the headings of divisions and sections and the explanatory sections also form part of the Act: s 182-1. The first thing one notices about these on a perusal of Div 147 is that there is nothing about them which alerts the reader to the prospect that Div 147 is effecting a fundamental change either to the prevailing general company law position in relation to the absence of personal liability of liquidators for the post liquidation debts of a corporation or, more particularly, to the usual position under the GST Act which is that the person who makes a supply is the one liable to GST. Section 147-1 merely informs the reader that Div 147 is "about" a requirement on the part of "representatives" of "incapacitated entities" to register.[11]
[11] (2008) 173 FCR 247, [38].
In a similar vein, there is nothing in the heading to section 58-10 to suggest a departure from the (by 2009, when section 58-10 was introduced, longstanding) absence of Commonwealth priority in respect of taxation debts.
This seemed to me to make it unlikely that the underlying policy of the 2009 amendments included this significant reversal of longstanding policy. Of course, this potential effect of the Administrators’ construction is confined to corporate liquidations and would not arise in this case as it is concerned with ITCs and administrators. Nevertheless, it would be a significant, unheralded departure from longstanding policy for the Commonwealth to enjoy effective priority over pre-appointment GST debts in company liquidations. And it is to be expected that section 58-10 was intended to operate coherently and consistently with other taxation laws, especially those concerned with insolvency.
Although this apparent feature of the Administrators’ construction might be thought to provide some support for the view that the Administrators’ construction should not be preferred, and Mr Slater seemed to indicate that it would indeed be an implication of that construction, he did not press the point.
Mr Livingston, on the other hand, argued that any liability for GST on pre-appointment supplies arising on the Administrators’ construction would be subject to pro rata treatment under section 260-45 of Schedule 1 to the Taxation Administration Act 1953 (Cth). On that premise, that outcome would be consistent with the apparent purpose of section 260-45 – to ensure that funds are set aside to meet the proportion of the debts of a company in liquidation calculated by reference to the company’s estimated outstanding tax-related liabilities as a percentage of all unsecured, non-priority debts applied to funds available for payment of the company’s debts.
It is, however, not immediately clear to me that section 260-45 would have that effect if section 58-10 is taken to impose a liability for GST on the representative in respect of pre-appointment taxable supplies as the Administrators’ construction requires in some cases. The focus of section 260-45 appears to be upon the company’s debts, not debts owed by the liquidator - for example, in section 260-45(3)’s reference to liabilities “that the company has” and section 260-45(5)’s reference to “debts of the company”. Conversely, it also seems improbable that GST liabilities actually incurred in the liquidation on supplies made by the representative – that on either construction fall upon the representative – would be subject to the section 260-45 pro rata requirement as Mr Livingston suggested.
However, in view of Mr Slater’s approach, I do not pursue this further.
The posited rationales for the competing constructions are both speculative. What is in fact the legislative purpose of Division 58 so far as it may be determined through permissible means?
Section 58-1
The Administrators say it is to be found in, and their construction conforms with, section 58-1 where it states “in most cases, GST-related liabilities and entitlements are allocated to the representative for transactions that are within the scope of the representative’s responsibility or authority”.
However, this statement begs the question at issue in this case, since it refers to transactions within the scope of the representative’s appointment. It casts little light on whether that means the transactions in question must be made by the representative for section 58-10 to apply or it is sufficient, as the Administrators say, if they are of a kind the representative could make within the scope of their authority.
If anything, the opening words of section 58-1 – referring to Division 58 setting out how to ascribe the “activities” of an incapacitated entity between the representative and the incapacitated entity – are more consistent with the Commissioner’s view that section 58-10 is concerned with who makes the supply or acquisition and whether it is within authority, than with a class of activities that might have been carried out by the representative if then appointed. But, when read with the following sentence in section 58-1 and in the context of Division 58 being a response to the PM Developments case, the first sentence is explicable as ascribing acts to the incapacitated entities regardless of whether the representatives carry out their duties as agent for the incapacitated entity. The concluding sentence, also emphasised by the Administrators, with its reference to allocating liabilities and entitlements to the representative for transactions within the scope of their appointment, is consistent with GST liabilities and entitlements being conferred on the representative even when acting as agent for the incapacitated entity – thus, correcting the mischief identified in PM Developments.
In summary, while section 182-10 permits reference to it to determine the object of Division 58 and for other limited purposes, I consider section 58-1 is expressed at such a level of generality that it is of limited use in resolving the issue for determination in this case.
Explanatory memorandum
The Administrators also say their submission regarding the object of Division 58 is supported by the Explanatory Memorandum to the 2009 amendment that inserted Division 58 of the GST Act (“EM”)[12] with its reference to the purpose of introducing the Division being “to ensure that a representative of an incapacitated entity is responsible for the. . .GST consequences that arise during its appointment.”[13] Similarly, they reference this statement:
New Division 58 also ensures that the representative is responsible for certain GST consequences which arise from a supply, acquisition or importation that falls within the scope of the representative’s responsibility or authority for managing the incapacitated entity’s affairs.[14]
[12] Explanatory Memorandum to the Tax Laws Amendment (2009 Measures No. 5) Bill 2009 (Cth).
[13] EM, [1.1].
[14] EM, [1.13].
In my view, as with section 58-1, a statement at this level of generality is of little assistance in determining the application of section 58-10 in the circumstances of this case. Like section 58-1, at best it is consistent with either of the competing constructions but begs the question to be resolved.
Similarly, the examples in the EM do not directly confront the issue in this case. However, I make these brief observations regarding the examples in the EM mentioned in the parties’ submissions.
Example 1.1 is as follows:
Representative continues an existing lease under a new agreement
In August LeaseCo Pty Ltd enters into a two-year agreement to lease commercial premises to a tenant. Prior to December, when a receiver is appointed with respect to the premises subject to a lease, LeaseCo Pty Ltd invoices and receives payment from the tenant for the previous four months rent at $1,100 per month.
The receiver notifies the tenant of their appointment and negotiates the continuation of the lease under a new agreement. Pursuant to subsection 58-10(1) the receiver is liable for the GST applicable to the supply of the premises under the new lease agreement.
The incapacitated entity remains liable for $400 GST, being the GST applicable to the supply of the premises for the four months prior to the representative’s appointment. The supply of the premises for the period prior to the representative’s appointment is not within the scope of the representative’s responsibility or authority for managing LeaseCo Pty Ltd’s affairs.
The explanation for the outcome in this example might appear to be consistent with the Commissioner’s approach. It does not suggest the reason why the incapacitated entity remains liable for GST on the original lease is because that transaction was not “of the kind” the receiver could enter into, as the Administrators would say, but nor does it address the issue directly. I do not rely on this example.
Example 1.3 is as follows:
Lay-by sales
RetailCo Pty Ltd offers a lay-by service to its customers. In August, prior to the appointment of a liquidator, RetailCo Pty Ltd had entered into a number of lay-by arrangements with customers, for which some instalment payments had been received, that were yet to be finalised.
Upon appointment, the liquidator agrees to continue with the lay-by arrangements with customers and continues to collect lay-by payments from customers. Upon finalisation of a lay-by arrangement when the relevant goods are made available to the customer, the liquidator will be liable for GST applicable to the supply of the goods, as the supply of those goods is within the scope of the liquidator’s responsibility or authority for managing the incapacitated entity’s affairs.
However the liquidator will not be liable for GST to the extent of payments received from the customer prior to their appointment. The incapacitated entity will remain liable for the amount of GST applicable to the payments received prior to the liquidator’s appointment under new paragraph 58-10(2)(a).
While the Administrators generally eschew reference to the examples, they do say:
Example 1.3, if anything, supports the [Administrators’] construction. It volunteers, as the reason why the incapacitated entity will remain liable for the GST, the fact that the incapacitated entity had received the payments of consideration not that the supply was made, prior to the appointment of the representative.[15]
[15] Applicants’ Outline of Submissions, [45].
It is not surprising that the example references section 58-10(2)(a) as the reason the incapacitated entity remains liable for the GST to the extent of the consideration it had received as that is section 58-10(2)(a)’s precise field of operation. The example does not address whether the representative made the supply, which may be the appropriate analysis for a supply of goods under a lay-by arrangement where neither title nor possession would pass until the final instalment is paid and only then because the liquidator agreed to continue with the agreement. Again, the issue in this case is not addressed directly and I place no reliance on this example.
Mr Livingston also emphasised various aspects of the EM he submitted were consistent with the submission that section 58-10 does not contain a temporal limitation and describe the obligations of a representative in a way that is consistent with the Administrators’ broader construction of section 58-10. It is not necessary to set these out. I have already indicated that the Commissioner’s construction is not dependent on a temporal dimension but rather the representative making the relevant supply, importation or acquisition. The general terms in which these references in the EM are expressed mean that, like the other provisions in Division 58 identified by Mr Livingston for this purpose, they are of limited value in the face of what is, in my view, a requirement expressed in section 58-10 in relatively clear terms.
Academic commentary
The Administrators drew attention to this passage in Company Receivers and Administrators:
Representatives of incapacitated entities, including administrators, are only liable for GST on a taxable supply made before their appointment to the extent that they receive consideration for that supply after the appointment. Similarly, they can only claim input tax credits on the same basis. In effect, this passes the GST liability of the entity to the representatives where the representatives receive the consideration for the supply after their appointment. But the representatives are not personally liable to pay GST out of their own pockets. They are only liable to pay GST out of their cash receipts. Indeed, they are "authorised and required" to apply the funds they receive in payment of their personal GST liability.”[16]
[Emphasis added by the Administrators]
[16] James O’Donovan, Company Receivers and Administrators, Thomson Reuters, [APX6.110].
I respectfully observe that this passage appears to elevate the exception to the representative’s liability provided for in section 58-10(2), where the incapacitated entity received the consideration before the representative was appointed, to the status of a rule that the representative is otherwise liable for supplies made before their appointment. And takes a corresponding approach to creditable acquisitions made before the appointment but paid for by the representative.
The structure of section 58-10 is that section 58-10(1) imposes a liability and confers an entitlement an incapacitated entity would otherwise have – as where a representative makes a supply or acquisition as agent for the incapacitated entity, such that it is the incapacitated entity that makes the supply – on the representative. Then section 58-10(2) provides an exception to that general rule if the incapacitated entity received or paid the consideration before the representative’s appointment.

It does not follow from those two propositions, as the passage seems to suggest, that the representative is liable for GST or entitled to ITCs for any taxable supplies/creditable acquisitions for which the representative receives/pays the consideration, including pre-appointment supplies and acquisitions. The consequence of that view would be to render the representative liable for GST if upon their appointment they proceeded to collect outstanding receivables. Again, it would seem to follow, contrary to longstanding policy, that the Commonwealth would obtain priority in respect of pre-appointment GST debts on that view.
CONCLUSION
The Commissioner’s construction confining section 58-10 to supplies and acquisitions made by the representative in my view reflects the more natural reading of the provision and is coherent with the scheme of the GST Act in relation to GST on taxable supplies and ITCs on creditable acquisitions and their attribution to tax periods. Nothing in the context of the surrounding provisions, nor the EM, clearly indicates otherwise. Nor is the practical outcome of this construction – that representatives are only liable for GST on taxable supplies, and entitled to ITCs on creditable acquisitions, which they actually make, and not on supplies and acquisitions made before their appointment by an entity over which they had no control – suggestive of a manifestly absurd, unreasonable or improbable intention to attribute to Parliament.
Construed in this way, section 58-10 remedies the mischief revealed by PM Developments, which clearly provided the impetus for the introduction of Division 58, by ensuring representatives of incapacitated entities are liable for GST and entitled to ITCs for transactions properly undertaken in their representative capacity even when undertaken as agent for the incapacitated entity. So far as it is able to be ascertained by permissible means, that was the policy of the 2009 amendments – the mischief to which they were directed – and that policy is achieved by applying the relatively clear ordinary meaning of section 58-10. And it involves no disturbance of the longstanding policy regarding the priority of pre-appointment debts.
Accordingly, I consider that section 58-10(1) only applies in respect of supplies and acquisitions made by a representative of an incapacitated entity (within the scope of their appointment). It follows that, consistent with the Commissioner’s objection decision, the Administrators were not entitled to the contested ITCs because they did not make the acquisitions to which they relate. The objection decision must therefore be affirmed.

I certify that the preceding 76 (seventy-six) paragraphs are a true copy of the reasons for the decision herein of Senior Member R J Olding

................................[SGD].......................................

Associate

Dated: 30 October 2020

Date of hearing:

19 October 2020

Counsel for the Applicant:

Solicitors for the Applicant:

L T Livingston

O’Loughlin Westhoff

Counsel for the Respondent:

C Slater

Solicitors for the Respondent:

ATO Review & Dispute Resolution

Date of hearing:	19 October 2020
Counsel for the Applicant: Solicitors for the Applicant:	L T Livingston O’Loughlin Westhoff
Counsel for the Respondent:	C Slater
Solicitors for the Respondent:	ATO Review & Dispute Resolution