ATO Interpretative Decision

ATO ID 2004/302

Goods and Services Tax

GST and construction of a car park on leased residential premises used for carrying on an enterprise
FOI status: may be released
Status of this decision: Decision Current
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for the acquisitions it makes to construct a car park on residential premises that it leases solely for the purpose of operating its business?

Decision

Yes, the entity is entitled to an input tax credit under section 11-20 of the GST Act for the acquisitions it makes to construct a car park on residential premises that it leases solely for the purpose of operating its business.

Facts

The entity is a business operator.

The entity operates its business from residential premises that it leases from a landlord. The entity does not make supplies that are input taxed.

The entity has approval from the landlord to construct a car park on the residential premises.

The car park is being built to provide parking facilities to be used solely by the entity's staff and customers.

The entity pays for the acquisition of the goods and services required to construct the car park. The entity does not receive any reimbursement from the landlord either directly (for example, a direct payment) or indirectly (for example, a reduction in the lease payments) for these acquisitions.

The entity is registered for goods and services tax (GST). The supply of the goods and services to the entity for the construction of the car park were taxable supplies under section 9-5 of the GST Act.

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.

Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if:

•
it acquires anything solely or partly for a creditable purpose
•
the supply of the thing to it is a taxable supply
•
it provides, or is liable to provide, consideration for the supply, and
•
it is registered, or required to be registered for GST.

The first requirement in section 11-5 of the GST Act is that the entity makes the acquisition solely or partly for a creditable purpose.

Under subsection 11-15(1) of the GST Act, an entity acquires a thing for a creditable purpose to the extent that it acquires the thing in carrying on its enterprise.

The entity is constructing a car park to provide car parking facilities to be used solely by its staff and customers. The entity is constructing the car park on the leased residential premises, from which the entity operates its business. Therefore, the entity acquires the goods and services in the course of conducting its enterprise.

However, subsection 11-15(2) of the GST Act provides that an entity does not acquire the thing for a creditable purpose to the extent that:

•
the acquisition relates to making supplies that would be input taxed, or
•
the acquisition is of a private or domestic nature.

The entity acquires goods and services in the course of conducting its enterprise, and they are not of a private or domestic nature. Further, the acquisition of the goods and services to construct the car park do not relate to making supplies by the entity that would be input taxed. As a result, subsection 11-15(2) of the GST Act does not apply and the acquisitions are for a creditable purpose.

The goods and services that the entity acquires in the construction of the car park were taxable supplies made to the entity under section 9-5 of the GST Act. The entity has paid for all of the acquisitions and has not been reimbursed by the landlord in any way. In addition, the entity is registered for GST. As such, the requirements of section 11-5 of the GST Act are satisfied and the entity is making a creditable acquisition when it acquires goods and services associated with constructing the car park.

Therefore, the entity is entitled to an input tax credit under section 11-20 of the GST Act when it acquires goods and services to construct a car park on residential premises that it leases for the purpose of operating its business.

Date of decision:  26 April 2002

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 11-5
   section 11-15
   subsection 11-15(1)
   subsection 11-15(2)
   section 11-20
   section 40-35

Keywords
Goods and services tax
Taxable supply
Creditable acquisition
GST input tax credits & creditable acquisitions
Creditable purpose

Siebel/TDMS Reference Number:  1268367

Business Line:  Indirect Tax

Date of publication:  2 April 2004

ISSN: 1445-2782

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