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  • 1.10. What are the GST implications if the recipient defaults in making payment under the agreement and the financier repossesses the goods?

    For source of ATO view, refer to paragraph 215 of GSTR 2000/29 Goods and services tax: attributing GST payable, input tax credits and adjustments and particular attribution rules made under section 29-25.

    For hire purchase agreements entered into before 1 July 2012 where the financier and recipient account for GST on a non-cash basis they may be required to make adjustments in accordance with Division 19 of the GST Act. The adjustments will be in respect of the GST previously paid and the input tax credits already claimed. The financier will be required to make a decreasing adjustment and the recipient an increasing adjustment.

    Where they account on a cash basis there may not be any GST implications.

    For hire purchase agreements entered into on or after 1 July 2012 the above adjustments may also be applicable in respect of the GST previously paid and the input tax credits already claimed on both the principal and the credit components.

    Any subsequent sale, lease or hire purchase agreement in respect of the repossessed goods will be treated as a new transaction and the normal GST rules will apply.

      Last modified: 31 Oct 2017QC 16359