ATO Interpretative Decision
ATO ID 2004/431
Goods and Services Tax
GST and entitlement to an input tax credit for the acquisition of a second-hand car from an eligible disabled personFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a car dealer, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for the acquisition of a second-hand car from an eligible disabled person who is not registered for goods and services tax (GST) where the subsequent supply of that car by the entity is a taxable supply?
Decision
Yes, the entity is entitled to an input tax credit under section 11-20 of the GST Act for the acquisition of a second-hand car from an eligible disabled person who is not registered for GST where the subsequent supply of that car by the entity is a taxable supply.
Facts
The entity is a car dealer.
The entity acquired a second-hand car from an eligible disabled person. The eligible disabled person originally purchased the car through a GST-free supply under Subdivision 38-P of the GST Act. The eligible disabled person is not registered or required to be registered for GST.
The entity held the car as trading stock in the course of carrying on its enterprise and sold the car to a customer.
The supply of the car to the customer was a taxable supply under section 9-5 of the GST Act.
Subdivision 66-B of the GST Act does not apply to the entity's acquisition of the car.
The entity is registered for GST.
Reasons for Decision
Section 11-20 of the GST Act provides that an entity is entitled to an input tax credit for any creditable acquisition that it makes.
Under section 11-5 of the GST Act, an entity makes a creditable acquisition if:
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- the entity acquires anything solely or partly for a creditable purpose
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- the supply of the thing to the entity is a taxable supply
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- the entity provides, or is liable to provide, consideration for the supply, and
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- the entity is registered, or required to be registered for GST.
The entity acquired the car for a creditable purpose, provided consideration for the supply and is registered for GST.
However, section 9-5 of the GST Act provides that, as the entity acquired the second-hand car from a person who is not registered or required to be registered, the supply to the entity was not a taxable supply.
Under subsection 66-5(1) of the GST Act, if an entity acquires second-hand goods for the purposes of sale or exchange (but not for manufacture) in the ordinary course of business, the fact that the supply of the goods to the entity is not a taxable supply does not stop the acquisition being a creditable acquisition.
As the entity acquired the second-hand car for the purposes of sale or exchange (but not for manufacture) in the ordinary course of its business, the requirements in subsection 66-5(1) of the GST Act are satisfied.
However, subsection 66-5(2) of the GST Act provides that section 66-5 of the GST Act does not apply, and is taken never to have applied to the acquisition, if:
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- the supply of the goods to the entity was a taxable supply or a GST-free supply
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- the entity imported the goods
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- the supply of the goods to the entity was a supply by way of hire
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- Subdivision 66-B of the GST Act applies to the acquisition, or
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- the entity makes a supply of the goods that is not a taxable supply.
The supply of the car to the entity, by the eligible disabled person who is not registered or required to be registered for GST, is neither a taxable supply nor a GST-free supply. The entity did not import the car, the supply of the car to the entity was not a supply by way of hire, Subdivision 66-B of the GST Act does not apply to the entity's acquisition of the car, and the entity's subsequent supply of the car is a taxable supply. Accordingly, subsection 66-5(2) of the GST Act does not exclude section 66-5 of the GST Act from applying. The fact that the supply of the car to the entity was not a taxable supply does not stop the entity's acquisition being a creditable acquisition.
Therefore, the entity is entitled to an input tax credit under section 11-20 of the GST Act, for the acquisition of a second-hand car from an eligible disabled person who is not registered for GST and where the entity's subsequent supply of the car is a taxable supply.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
section 11-5
section 11-20
Subdivision 38-P
section 66-5
subsection 66-5(1)
subsection 66-5(2)
Subdivision 66-B
ATO ID 2004/166
Keywords
Goods and services tax
Cars for disabled veterans
Cars for other disabled people
GST input tax credits & creditable acquisitions
GST special rules
GST second hand goods
GST supplies & acquisitions
ISSN: 1445-2782
| Date: | Version: | |
| You are here → | 21 December 2001 | Original statement |
| 15 June 2007 | Archived |