1.1. What is the meaning of hire purchase for GST purposes?
Non-interpretative – other references (see paragraphs 190 - 202 of GSTR 2000/29External Link - Goods and services tax: attributing GST payable, input tax credits and adjustments and particular attribution rules made under section 29-25)
For GST purposes, hire purchase has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This provision defines a hire purchase agreement to mean a contract for the hire of goods where:
- the hirer has the right or obligation to buy the goods
- the charge that is or may be made for hire, together with any other amount payable under the contract (including an amount to buy the goods or to exercise an option to do so), exceeds the price of the goods
- title to the goods does not pass to the hirer until the option to purchase is exercised, or
- there is an agreement for the purchase of goods by instalments where title in the goods does not pass until the final instalment is paid.
Essentially, hire purchase agreements represent financing arrangements which facilitate the sale and purchase of goods. Accordingly for GST, hire purchase agreements will be treated as a sale of goods and a separate supply of finance.
Supplies of goods or credit under hire purchase agreements are not progressive supplies under Division 156 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).