ATO Interpretative Decision

ATO ID 2001/471 (Withdrawn)

Goods and Services Tax

GST and trade-in of motor vehicle partly used for business
FOI status: may be released

This ATO ID is withdrawn as it is superseded by NAT 4629 - GST and motor vehicles.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 sole trader, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it trades in a motor vehicle that it has used partly for business purposes?

Decision

Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it trades in a motor vehicle that it has used partly for business purposes.

Facts

The entity is a sole trader carrying on an enterprise. The entity is trading in its vehicle for another vehicle.

The entity used the vehicle partly for private and partly for business purposes. The replacement vehicle will be used in the same way.

The entity is registered for the goods and services tax (GST) and the supply is made in Australia.

Reasons for Decision

Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply.

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

•: the supply is for consideration;
•: the supply is made in the course or furtherance of an enterprise that the entity carries on;
•: the supply is connected with Australia; and
•: the entity is registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

In this case, the consideration received for the supply of the vehicle is the difference between the price of the replacement vehicle and the amount of other consideration (for example cash) provided for the replacement vehicle.

The supply is made in Australia and the entity is registered for GST.

The question in this case is whether the trade-in is a supply made in the course or furtherance of the entity's enterprise. From the facts it is evident that the supply is made in connection with the enterprise, and/ or for the purpose or object of achieving the enterprises goals. Therefore, the trade in of the vehicle is a supply made in the course or furtherance of the entity's enterprise.

As such, the trade in of the motor vehicle satisfies all of the positive limbs of section 9-5 of the GST Act.

The supply of the vehicle is not GST-free under Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act, when it trades in a motor vehicle used partly for business purposes.

The GST payable is 1/11th of the consideration received for the trade-in.

[NOTE: Where a motor vehicle that has been used solely or partly for a private or domestic purpose is supplied by way of sale, the entity may be entitled to a decreasing adjustment under section 132-5 of the GST Act.]

Date of decision: 22 August 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   Division 40
   section 132-5

Keywords
Goods and services tax
GST supplies and acquisitions
Taxable supply

Business Line: GST

Date of publication: 17 October 2001

ISSN: 1445-2782

history

	Date:	Version:
	22 August 2001	Original statement
You are here	15 June 2007	Archived

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