1.5. Are there special rules for the phasing in of input tax credits on motor vehicles?
Non-interpretative – straight application of the law
Section 20 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act) relates to the phasing in of input tax credits for new motor vehicles. The phasing in of input tax credits for new motor vehicles will apply to purchasers, including those who purchase under hire purchase agreements. This means that purchasers will not be entitled to input tax credits for new motor vehicles acquired under hire purchase agreements entered into prior to 23 May 2001.
A purchaser will be entitled to input tax credits for a new motor vehicle acquired under a hire purchase agreement entered into on or after 23 May 2001. This entitlement to an input tax credit will be reduced where the motor vehicle is partly for a creditable purpose or the car depreciation limit is exceeded.
The phasing in rules do not apply to new motor vehicles purchased by financiers for re-supply under hire purchase agreements, as they are holding the new motor vehicles as trading stock in accordance with subsection 20(4)(a) of the Transition Act. The provision also does not apply to second hand vehicles in accordance with subsection 20(4)(b) of the Transition Act.