ATO Interpretative Decision

ATO ID 2001/790 (Withdrawn)

Goods and Services Tax

GST and entitlement to an input tax credit when an entity provides consideration for an acquisition made by another entity
FOI status: may be released

This ATO ID is withdrawn on the basis that a precedential view exists. The ATO view for this issue is covered in Goods and Services Tax Ruling GSTR 2005/D8

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 entity A 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 provides consideration for an acquisition made by entity B?

Decision

No, entity A is not entitled to an input tax credit under section 11-20 of the GST Act when it provides consideration for an acquisition made by entity B.

Facts

Entity A enters into an agreement with entity B to provide consideration for an acquisition that entity B makes.

Entity B makes the acquisition in the course of its enterprise. The supply to entity B is a taxable supply under section 9-5 of the GST Act.

A partnership, principal/agent relationship or joint venture relationship does not exist between the two entities.

Entity A 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.

Under section 11-5 , an entity makes a creditable acquisition if:

(a): it acquires anything solely or partly for a creditable purpose; and
(b): the supply of the thing to it is a taxable supply; and
(c): it provides, or is liable to provide, consideration for the supply; and
(d): it is registered, or required to be registered for GST.

In this case, entity A is registered for GST. Entity A also provides consideration for the supply. Therefore, entity A meets the requirements in paragraphs 11-5(c) and 11-5(d) of the GST Act.

Paragraph 11-5(a) of the GST Act stipulates that the entity must acquire the thing for a creditable purpose. Under subsection 11-15(1), an entity has acquired something for a creditable purpose if the acquisition is made in carrying on the entity's enterprise. In this case, entity A is responsible for payment of the cost of the acquisition. However, entity A does not make the acquisition in the course of its enterprise; entity B makes the acquisition in the course of its enterprise. Therefore, paragraph 11-5(a) has not been met by entity A.

In addition, paragraph 11-5(b) of the GST Act states that the supply of the thing to the entity must be a taxable supply. Although entity A pays for the acquisition, it does not make the acquisition. The taxable supply is made to entity B. Therefore, paragraph 11-5(b) of the GST Act has not been met because the taxable supply is not made to entity A, rather it is made to entity B.

Therefore, as paragraphs (a) and (b) of section 11-5 of the GST Act are not met, entity A is not making a creditable acquisition. As such, entity A is not entitled to input tax credits under section 11-20 of the GST Act when it provides consideration for an acquisition made by entity B.

Date of decision: 28 September 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 11-5
   paragraph 11-5(a)
   paragraph 11-5(b)
   paragraph 11-5(c)
   paragraph 11-5(d)
   subsection 11-15(1)
   section 11-20

Keywords
Goods & services tax
GST supplies & acquisitions
Creditable acquisition
Creditable purpose

Business Line: GST

Date of publication: 21 December 2001

ISSN: 1445-2782

history

	Date:	Version:
	28 September 2001	Original statement
You are here	17 February 2006	Archived

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