8.4. Is a debt factor entitled to input tax credits (or reduced input tax credits) for acquisitions it makes in relation to the financial supply of the acquisition of the interest in the debt?
For source of ATO view, refer to:
- paragraphs 424 to 442 of GSTR 2004/1External Link - Goods and services tax: reduced credit acquisitions
- paragraphs 54 to 108 of GSTR 2008/1External Link - Goods and services tax: when do you acquire anything or import goods solely or partly for a creditable purpose?
Where the debt factor makes acquisitions in relation to a debt acquired from the assignor, Division 11 does not allow an input tax credit for the acquisitions. This is because the acquisitions relate to making input taxed supplies. For example, where a debt factor does not make any taxable supplies (including sales accounting and debt collection services) and he pays rent for an office from which he carries on his debt factoring enterprise, an entitlement to any input tax credit in relation to the rental payments does not arise under Division 11.
However, if an acquisition is a reduced credit acquisition, the debt factor may be entitled to a reduced input tax credit. For example, certain aspects of debt collection services acquired by the debt factor to collect the money owing on the assigned debt are reduced credit acquisitions (see item 17 of Regulation 70-5.02).