ATO Interpretative Decision

ATO ID 2002/668 (Withdrawn)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 input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for goods and services that it acquires in the course of making input taxed supplies where the entity does not carry on any enterprise outside Australia and the input taxed supplies are not financial supplies?

Decision

No, the entity is not entitled to input tax credits under section 11-20 of the GST Act for goods and services that it acquires in the course of making input taxed supplies where the entity does not carry on any enterprise outside Australia and the input taxed supplies are not financial supplies.

Facts

The entity is a business operator in Australia. The entity does not carry on any enterprise outside Australia. The entity makes input taxed supplies that are not financial supplies. The entity acquires goods and services in the course of making these input taxed supplies.

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

Reasons for Decision

Section 11-20 of the GST Act provides that an entity is entitled to the input tax credit for any creditable acquisition that it makes.

Section 11-5 of the GST Act lists the requirements that must be satisfied for an entity to make a creditable acquisition. One of the requirements is that the entity must make the acquisition solely or partly for a creditable purpose (paragraph 11-5(a) of the GST Act).

Section 11-15 of the GST Act defines the meaning of creditable purpose. Paragraph 11-15(2)(a) of the GST Act provides that an entity does not make an acquisition for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed.

However, for the purposes of paragraph 11-15(2)(a) of the GST Act, an acquisition is not treated as relating to making supplies that would be input taxed if the acquisition relates to an input taxed supply:

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that is made through an enterprise, or part of an enterprise that the entity carries on outside Australia (subsection 11-15(3) of the GST Act);

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that is a financial supply and the entity does not exceed the financial acquisition threshold (subsection 11-15(4) of the GST Act); or

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that consists of a borrowing (a financial supply) and the borrowing relates to other supplies that the entity makes that are not input-taxed (subsection 11-15(5) of the GST Act).

The entity does not carry on any enterprise outside Australia and the acquisitions that the entity makes do not relate to making financial supplies. Therefore, subsections 11-15(3) to 11-15(5) of the GST Act do not apply. The acquisitions relates to making supplies that would be input taxed supplies and, under paragraph 11-15(2)(a) of the GST Act, are not for a creditable purpose.

The acquisitions are not creditable acquisitions under section 11-5 of the GST Act as they are not for a creditable purpose. Therefore, the entity is not entitled to input tax credits under section 11-20 of the GST Act for goods and services that it acquires in the course of making input taxed supplies where the entity does not carry on any enterprise outside Australia and the input taxed supplies are not financial supplies.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 11-5
   paragraph 11-5(a)
   section 11-15
   paragraph 11-15(2)(a)
   subsection 11-15(3)
   subsection 11-15(4)
   subsection 11-15(5)
   section 11-20

Keywords
Goods and services tax
GST supplies & acquisitions
Creditable acquisition
Creditable purpose
Input taxed supplies

Business Line:  GST

Date of publication:  26 June 2002

ISSN: 1445-2782