ATO Interpretative Decision

ATO ID 2002/513 (Withdrawn)

Goods and Services Tax

GST and second-hand goods purchased for use in an enterprise other than as trading stock
FOI status: may be released

This ATO ID is withdrawn as the current ATO position on this issue is contained in GSTR 2005/3.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 66-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it acquires second-hand goods for use in its enterprise other than as trading stock?

Decision

No, the entity is not making a creditable acquisition under section 66-5 of the GST Act, when it acquires second-hand goods for use in its enterprise other than as trading stock.

Facts

The entity is a second-hand goods dealer. The entity purchases second-hand goods. The supply of the second-hand goods to the entity is neither a taxable supply nor a GST-free supply. The entity uses the goods in carrying on its enterprise but they do not form part of the entity's trading stock.

The entity then sells the second-hand goods. This sale by the entity is a taxable supply.

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

Reasons for Decision

Division 66 of the GST Act allows an entity, in some circumstances, to claim 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 to the entity is not a taxable supply does not stop the acquisition being a creditable acquisition.

The meaning of the expression 'goods acquired for the purpose of sale or exchange (but not for manufacture) in the ordinary course of business' is considered in Goods and Services Tax Ruling GSTR 2000/8. Paragraphs 31 and 34 of GSTR 2000/8 provides that the expression 'goods acquired for the purpose of sale or exchange (but not for manufacture) in the ordinary course of business' refer to 'trading stock' as that term is ordinarily used.

Although GSTR 2000/8 is a ruling on the operation of section 16 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act), it is appropriate to apply the same interpretation of the expression 'for the purpose of sale or exchange (but not for manufacture) in the ordinary course of business' to section 66-5 of the GST Act because that expression is used in the same context in section 16 of the Transition Act and section 66-5 of the GST Act.

The entity acquires the second-hand goods to use in its enterprise but they do not form part of the entity's trading stock. The acquisition of the second hand goods is not for the purpose of sale or exchange (but not for manufacture) in the ordinary course of the entity's business. Therefore, the entity is not making a creditable acquisition under section 66-5 of the GST Act, when it acquires second-hand goods for use in its enterprise other than as trading stock.

[Note: The entity is not making a creditable acquisition under section 11-5 of the GST Act as the supply of the second-hand goods to the entity was not a taxable supply. In addition, the entity is not making a creditable acquisition under section 66-5 of the GST Act as the second-hand goods were not acquired for the purpose of sale or exchange in the ordinary course of business. Therefore, the entity is not entitled to an input tax credit for the acquisition of the second-hand goods under section 11-20 of the GST Act.]

Date of decision: 28 June 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 11-20
   Division 66
   section 66-5
   subsection 66-5(1)

Related Public Rulings (including Determinations)
GSTR 2000/8

Keywords
Goods and services tax
GST special rules
GST second-hand goods
Creditable acquisition

Business Line: GST

Date of publication: 31 May 2002

ISSN: 1445-2782

history

	Date:	Version:
	28 June 2001	Original statement
You are here	29 October 2010	Archived

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