ATO Interpretative Decision

ATO ID 2002/27 (Withdrawn)

Goods and Services Tax

GST and second-hand goods acquired from an unregistered entity
FOI status: may be released

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.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 second-hand goods dealer, making a creditable acquisition under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), and can thus attribute an input tax credit, when it acquires goods from another entity that is neither registered nor required to be registered for goods and services tax (GST)?

Decision

Yes, the entity is making a creditable acquisition under section 11-5 of the GST Act, and can thus attribute an input tax credit, when it acquires goods from another entity that is neither registered nor required to be registered for GST.

Facts

The entity is a second-hand goods dealer and is registered for GST. The entity acquires second-hand goods, as trading stock for the purposes of sale or exchange (but not for manufacture) in the ordinary course of its business. The goods are not divided for re-supply.

The entity acquires second-hand goods from a supplier that is neither registered nor required to be registered for GST. The entity subsequently sells the goods to a customer. The supply of the goods to the customer is a taxable supply.

Reasons for Decision

Section 11-5 of the GST Act sets out the requirements that must be satisfied for an acquisition to be a creditable acquisition. An entity makes a creditable acquisition if:

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

In this case, the acquisition of the second-hand goods satisfies the requirements in paragraphs 11-5(a), 11-5(c) and 11-5(d) of the GST Act. As such, it is necessary to determine whether the supply of the goods to the entity is a taxable supply.

In order for the supply of the second-hand goods to the entity to be a taxable supply, among other requirements, the supplier of the second-hand goods must be registered for GST or required to be registered for GST (paragraph 9-5 (d) of the GST Act).

In this case, the entity acquires the second-hand goods from an entity that is neither registered nor required to be registered for GST. Therefore, the supply of the second-hand goods to the entity is not a taxable supply. Accordingly paragraph 11-5(b) of the GST Act is not satisfied.

However, Division 66 of the GST Act allows an entity, in some circumstances, to attribute an input tax credit for an acquisition of second-hand goods even though the supply to the entity was not a taxable supply. Section 66-5 of the GST Act outlines when an entity will make a creditable acquisition of second-hand goods.

Subsection 66-5(1) of the GST Act provides that when an entity acquires second-hand goods for the purpose of sale or exchange (but not for manufacture) 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.

In this case, the supply of the second-hand goods to the entity is not a taxable supply and the entity acquired the goods for the purposes of sale or exchange (but not for manufacture) in the ordinary course of its business.

Accordingly, the requirements in subsection 66-5(1) of the GST Act are satisfied and, as the exclusions in subsection 66-5(2) of the GST Act do not apply, the entity is making a creditable acquisition for the purposes of section 11-5 of the GST Act. Therefore the entity can attribute an input tax credit.

[Note: Division 66 of the GST provides the special rules that apply to the amount of the input tax credit and the tax period to which the input tax credit can be attributed.]

Date of decision: 17 September 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 11-5
   paragraph 11-5(1)(a)
   paragraph 11-5(1)(b)
   paragraph 11-5(1)(c)
   paragraph 11-5(1)(d)
   section 11-20
   Division 66
   section 66-5
   subsection 66-5(1)
   subsection 66-5(2)

Keywords
Goods & services tax
GST second-hand goods
GST supplies & acquisitions
Creditable acquisition

Business Line: GST

Date of publication: 24 January 2002

ISSN: 1445-2782

history

	Date:	Version:
	17 September 2001	Original statement
You are here	7 October 2005	Archived

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