ATO Interpretative Decision

ATO ID 2001/657 (Withdrawn)

Goods and Services Tax

• This ATO ID is a straight application of the law and does not contain an interpretative decision.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it acquires a new motor vehicle by way of hire purchase, before 23 May 2001?

Decision

No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act when it acquires a new motor vehicle by way of hire purchase, before 23 May 2001.

Facts

The entity is a business operator. The entity acquires a new motor vehicle by way of hire purchase, before 23 May 2001. The entity takes delivery of the motor vehicle before 23 May 2001.

The entity is registered for goods and services tax (GST).

The purchase of the motor vehicle is a creditable acquisition in accordance with section 11-5 of the GST Act.

The entity does not purchase the motor vehicle to hold as trading stock, or for hire. The entity is not an insurer acquiring the motor vehicle in settlement of an insurance claim.

The dealing in respect of the acquisition of the motor vehicle would have been taxable under the sales tax law if sales tax had not been ended by the A New Tax System (End of Sales Tax) Act 1999.

Reasons for Decision

Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. The entity is making a creditable acquisition in accordance with section 11-5 of the GST Act.

However, section 20 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act) contains special transitional rules relating to the phasing in of input tax credits for motor vehicles.

Under subsection 20(2) of the Transition Act, where an entity imports or acquires a motor vehicle by way of purchase, including hire purchase, the entity is not entitled to an input tax credit if the acquisition or importation is made before 23 May 2001.

Under subsection 20(4) of the Transition Act, the phasing in of input tax credits does not apply if the motor vehicle:

•

is acquired or imported to hold as trading stock (unless it is held for hire); or

•

is second-hand; or

•

would have been sales tax exempt, if sales tax had still applied; or

•

is acquired by an insurer to replace another vehicle under an insurance policy.

[History note: The words 'or imported' and '(unless it is held for hire)' were added to the first dot point in this paragraph to more closely reflect the wording of subsection 20(4) of the Transition Act. The amendment was made on 4 September 2002.]

In this case, the entity is acquiring the motor vehicle by way of hire purchase, before 23 May 2001 and none of the exclusions in subsection 20(4) of the Transition Act apply. Therefore, section 20 of the Transition Act denies the entity an input tax credit under section 11-20 of the GST Act, when it acquires a new motor vehicle by way of hire purchase, before 23 May 2001.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 11-5
   section 11-20

Keywords
Goods & services tax
GST supplies and acquisitions
Creditable acquisition
GST transitional issues
Special transitional rules

Business Line:  GST

Date of publication:  30 November 2001

ISSN: 1445-2782