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ATO Interpretative Decision

ATO ID 2003/449 (Withdrawn)

Goods and Services Tax

GST and input tax credits for car dealers acquiring cars from a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school
FOI status: may be released
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 its acquisition of a used car from a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school ('a charity etc') where the supply to the entity is a GST-free supply under section 38-250 of the GST Act?

Decision

No. The entity is not entitled to an input tax credit under section 11-20 of the GST Act for its acquisition of a used car from a charity etc, where the supply to the entity is a GST-free supply under section 38-250 of the GST Act.

Facts

The entity is a car dealer. The entity acquires a used car from a charity etc.

The supply to the entity is a GST-free supply under section 38-250 of the GST Act.

The entity intends to on sell the car through its dealership.

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

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.

Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if:

•
it acquires anything solely for a creditable purpose;
•
the supply of the thing to the entity is a taxable supply;
•
the entity provides, or is liable to provide consideration for the supply; and
•
the entity is registered, or required to be registered for GST.

The supply of the used car by the charity etc to the entity is GST-free under section 38-250 of the GST Act. Therefore, the supply to the entity is not a taxable supply and the second requirement of section 11-5 of the GST Act is not satisfied.

A special rule in Division 66 of the GST Act provides that if an entity acquires second-hand goods for the purpose of sale or exchange 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. However, paragraph 66-5(2)(a) of the GST Act provides that Division 66 of the GST Act does not apply if the supply of the goods to the entity is taxable or GST-free.

Although the entity has acquired the used car for the purpose of on selling it through its business, the supply of the used car to the entity is GST-free. Therefore, the special rule in Division 66 of the GST Act does not apply.

Accordingly, the entity is not making a creditable acquisition and is not entitled to an input tax credit under section 11-20 of the GST Act for its acquisition of a used car from a charity etc where the supply to the entity is a GST-free supply under section 38-250 of the GST Act.

[Note 1: section 38-250 of the GST Act provides that supplies made by a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school, for nominal consideration are GST-free.
Note 2: if the supply of the used car by a charity etc to the entity is a taxable supply and the remaining requirements in section 11-5 of the GST Act are satisfied, the entity would be entitled to an input tax credit under section 11-20 of the GST Act.]

Date of decision:  14 November 2002

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 11-5
   section 11-20
   section 38-250
   Division 66
   paragraph 66-5(2)(a)

Keywords
Goods and services tax
GST free
GST non profit
GST charities
GST input tax credits & creditable acquisitions
GST second hand goods
GST supplies & acquisitions
Creditable acquisition

Business Line:  GST

Date of publication:  20 June 2003

ISSN: 1445-2782

history
  Date: Version:
  14 November 2002 Original statement
You are here 2 December 2005 Archived

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