ATO Interpretative Decision

ATO ID 2006/43

Goods and Services Tax

GST and input tax credits for acquisitions made by the agent of joint venture participants
FOI status: may be released

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Issue

Is the entity, an operator of a GST joint venture, entitled to input tax credits under subsection 51-35(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for creditable acquisitions made by the agent for the joint venture participants in relation to a project to expand the joint venture enterprise?

Decision

No, the entity is not entitled to input tax credits under subsection 51-35(1) of the GST Act on creditable acquisitions made by the agent for the joint venture in relation to a project to expand the joint venture enterprise.

Facts

The entity is an operator of a GST joint venture.

The GST joint venture conducts an enterprise. An expansion, which is in the course of the joint venture activities, has been undertaken by the joint venture participants.

The agent for the joint venture participants was appointed as the manager of the expansion project. The agent's appointment arises under an agreement between the joint venture participants and the agent. Under the agreement, the agent is authorised as agent on behalf of the participants, to enter into contracts and place orders for the acquisition of goods and services.

Under the agreement, the entity is appointed as the representative of the joint venture participants in their dealings with the agent. To the extent that the agent requires funds, those funds are paid to the agent by the entity as representative of the joint venture participants. The entity 'cash calls' the funds from the joint venture participants.

The agent is not acting as agent for the entity, rather it is the agent of the joint venture participants.

The entity and the GST joint venture are registered for goods and services tax (GST).

Reasons for Decision

Subsection 51-35(1) of the GST Act provides that if the joint venture operator of a GST joint venture makes a creditable acquisition on behalf of another entity that is a participant in the joint venture, in the course of activities for which the joint venture was entered into:

•: the joint venture operator is entitled to the input tax credit for the acquisition or importation; and
•: the participant is not entitled to the input tax credit on the acquisition or importation.

This section has the effect despite sections 11-20 and 15-15, which are about who is entitled to input tax credits (subsection 51-35(2) of the GST Act).

The acquisitions from third party suppliers in relation to the project to expand the enterprise conducted by the joint venture have been made by the agent in its capacity as agent for the participants in the joint venture. These supplies have not been acquired by the entity in its capacity as operator of the joint venture.

All the entity has done is to provide the funds to the agent to enable the acquisitions to be made from third party suppliers. Under the agreement, the acquisitions are made by the agent, as agent for the joint venture participants and not by the entity.

As the entity has not made a creditable acquisition on behalf of a joint venture participant it is not entitled to input tax credits under subsection 51-35(1) of the GST Act.

Note: entitlements to input tax credits will be affected by any arrangement entered into between the agent and the joint venture participants for purposes of Subdivision 153-B of the GST Act.

Date of decision: 20 January 2006

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 11-20
   section 15-15
   subsection 51-35(1)
   subsection 51-35(2)
   Subdivision 153-B

Related Public Rulings (including Determinations)
Goods and Services Tax Ruling GSTR 2004/2

Keywords
Goods and services tax
GST input tax credits & creditable acquisitions
GST special rules
Acquisitions and supplies by Agents
GST joint ventures
GST supplies & acquisitions
Creditable acquisition

Siebel/TDMS Reference Number: 4978206

Business Line: Indirect Tax

Date of publication: 17 January 2006

ISSN: 1445-2782

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