ATO Interpretative Decision

ATO ID 2002/21

Goods and Services Tax

• 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 attribute the input tax credit, for an acquisition of goods financed by a consumer credit loan, under section 29-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), to the tax period in which it purchases the goods?

Decision

Yes, the entity is entitled to attribute the input tax credit for an acquisition of goods financed under a consumer credit loan, under section 29-10 of the GST Act, to the tax period in which it purchases the goods.

Facts

The entity is a business operator. The entity purchased goods that are to be used solely for business purposes. The entity has title to the goods and holds a tax invoice for the purchase.

The purchase of the goods is a creditable acquisition under section 11-5 of the GST Act and the entity is entitled to an input tax credit under section 11-20 of the GST Act.

The purchase of the goods was fully financed by a finance company under a consumer credit loan.

A consumer credit loan is a method of financing that is not a hire purchase arrangement. The finance company lends the borrower money and the borrower uses this money to purchase goods.

The entity is registered for goods and services tax (GST) and accounts for GST on a cash basis.

Reasons for Decision

Section 29-10 of the GST Act provides the rules that are used to determine to which tax period an input tax credit for a creditable acquisition is attributable.

Where the entity accounts for GST on a cash basis, subsection 29-10(2) of the GST Act provides:

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if, in a tax period, the entity provides all of the consideration for a creditable acquisition - the input tax credit for the creditable acquisition is attributable to that tax period; or

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if in a tax period, the entity provides part of the consideration - the input tax credit for the creditable acquisition is attributable to that tax period, but only to the extent that the entity provided the consideration in that tax period; or

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if in a tax period, none of the consideration is provided - none of the input tax credit for the acquisition is attributable to that tax period.

However, under subsection 29-10(3) of the GST Act, if the entity does not hold a tax invoice when it submits a GST return for that tax period, an input tax credit is not attributable to that tax period.

In this case, there are two separate acquisitions for GST purposes. The first acquisition is the acquisition of finance from the finance company. The second acquisition is the acquisition of goods by the entity from the supplier. In relation to the acquisition of goods, the entity obtains funds from the finance company under a consumer credit loan and uses these funds to provide full payment for the creditable acquisition of goods from the supplier. As such, it is the entity that is providing all the consideration to the supplier for the supply of goods at the time of the purchase (not the finance company).

The entity accounts on a cash basis, provided all of the consideration for the goods at the time of the purchase and holds a tax invoice for that purchase. Therefore, the entity is entitled to attribute the input tax credit for an acquisition of goods financed under a consumer credit loan under section 29-10 of the GST Act to the tax period in which it purchases the goods.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 11-5
   section 11-20
   section 29-10
   subsection 29-10(2)
   paragraph 29-10(2)(a)
   subsection 29-10(3)

Keywords
Goods & services tax
GST supplies and acquisitions
Creditable acquisition
GST consideration
GST tax periods
Attribution rules

Siebel/TDMS Reference Number:  CW221400

Business Line:  Indirect Tax

Date of publication:  17 January 2002

ISSN: 1445-2782