• 7.3. When do I exceed the financial acquisitions threshold?

    For source of ATO view, refer to paragraphs 13-22 of GSTR 2003/9External Link - Goods and Services Tax: financial acquisitions threshold

    Sections 189-5 and 189-10 of the GST Act set out when an entity will exceed the financial acquisitions threshold.

    You exceed the financial acquisitions threshold if you make, or are likely to make, financial acquisitions where the input tax credits related to making those acquisitions would exceed the lesser of either:

    • $50,000 (before 1 July 2012) or $150,000 (on or after 1 July 2012), or such other amount specified in the Regulations (first limb test), or
    • 10% of the total amount of input tax credits to which you would be entitled (second limb test).

    If either or both of these levels are exceeded, an entity will have exceeded the financial acquisitions threshold.

    You will determine whether you exceed the financial acquisitions threshold in a given month based on your acquisitions in:

    • that month and the previous 11 months, and
    • that month and the next 11 months.

    Example 1 - assessing whether the FAT is exceeded in a tax period before 1 July 2012

    Total input tax credit of $40,000 of which:

    • $5,000 relates to acquisitions for making financial supplies      
      • $35,000 relates to acquisitions for making taxable supplies.
       

    Question:
    Is the entity entitled to claim full input tax credit?

    Answer:
    No.

    Reason:

    Although the entity's input tax credit relating to financial acquisitions is less than $50,000 (because it related to a tax period before 1 July 2012), it still exceeds the financial acquisitions threshold because the input tax credit relating to financial acquisitions is more than 10% of the entity's total input tax credit. The entity will not be able to claim the $5,000 credit which relates to acquisitions for making financial supplies.

    Example 2 - assessing whether the FAT is exceeded in a tax period after 1 July 2012

    Total input tax credit of $1,845,000 of which:

    • $155,000 relates to acquisitions for making financial supplies      
      • $1,690,000 relates to acquisitions for making taxable supplies.
       

    Question:
    Is the entity entitled to claim full input tax credit?

    Answer:
    No.

    Reason:

    Although the entity's input tax credit relating to financial acquisitions is less than 10% of the entity's total input tax credit, it still exceeds the financial acquisitions threshold because the input tax credit relating to financial acquisitions is more than $150,000 (because it relates to a tax period after 1 July 2012). The entity will not be able to claim the $155,000 credit which relates to acquisitions for making financial supplies.

    Example 3 - assessing whether the FAT is exceeded in a tax period after 1 July 2012

    Total input tax credit of $1,038,000 of which:

    • $100,000 relates to acquisitions for making financial supplies
      • $938,000 relates to acquisitions for making taxable supplies.
       

    Question:
    Is the entity entitled to claim full input tax credit?

    Answer:
    Yes.

    Reason:

    The entity's total input tax credit relating to financial acquisitions is less than $150,000 (on or after 1 July 2012) and it does not exceed 10% of the entity's total input tax credit.

    The entity will be entitled to full input tax credits.

    End of example
      Last modified: 24 Jun 2015QC 16359