2.j. Is a dealer entitled to an input tax credit on a second-hand car acquired from an unregistered entity that is sold GST-free to an eligible person with a disability?
Non-interpretative - straight application of the law.
A dealer is not entitled to an input tax credit in these circumstances. Where a dealer acquires a second-hand car for the purposes of sale or exchange, the GST Act entitles a dealer to claim an input tax credit in respect of creditable acquisitions of second-hand vehicles from unregistered vendors.
However, an input tax credit is not available if the dealer makes a supply of the vehicle that is not a taxable supply. As the supply to an eligible person with a disability is a GST-free supply the dealer is not entitled to an input tax credit.
Dealers should take this into account when pricing the vehicle to a person with a disability so that the dealer's profit margin can be maintained.
This issue was referred to the Australian Competition and Consumer Commission (ACCC) and the advice confirmed that dealers would not be contravening pricing guidelines if they maintain their same profit margin when selling to a person with a disability.