| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011510893532
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: GST and second-hand goods
Question
Are you entitled to claim an input tax credit in accordance with Division 66 of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act) on the purchase of second hand gold jewellery, where the supplier is an individual and not registered for GST?
Answer: Yes.
You are entitled to claim an input tax credit in accordance with Division 66 of the GST Act on the purchase of second hand gold jewellery, where the supplier is an individual and not registered for GST.
This ruling applies for the following period
The scheme commenced on
Relevant facts
You are an Australian entity registered for GST and account for GST on an accrual basis.
You acquire second hand gold jewellery from individuals who are not registered for GST.
The jewellery may be damaged or incomplete. However, some gold jewellery acquired may be in perfect condition.
You acquire the gold jewellery for the purpose of sale and you do not undertake any manufacturing process in relation to these goods.
The acquired gold jewellery is sold to another Australian entity and this subsequent supply is a taxable supply.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5.
A New Tax System (Goods and Services Tax) Act 1999 Section 11-5.
A New Tax System (Goods and Services Tax) Act 1999 Division 66.
A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.
Reasons for decision
Division 66 of the GST Act provides that an acquisition of a second-hand good you make may be a creditable acquisition (allowing you to claim a GST credit) despite the fact that the supplier was not registered or required to be registered for GST.
Section 66-5 of the GST Act states:
1. If you acquire *second-hand goods for the purposes of sale or exchange (but not for manufacture) in the ordinary course of *business, the fact that the supply of the goods to you is not a *taxable supply does not stop the acquisition being a *creditable acquisition.
2. However, this section does not apply, and is taken never to have applied, to the acquisition if:
(a) the supply of the goods to you was a *taxable supply, or was *GST-free; or
(b) you *imported the goods; or
(c) the supply of the goods to you was a supply by way of hire; or
(d) Subdivision 66-B applies to the acquisition; or
(e) you make a supply of the goods that is not a taxable supply.
The term 'second-hand goods' is defined in section 195-1 of the GST Act as:
second-hand goods does not include:
(a) *precious metal; or
(b) goods to the extent that they consist of gold, silver, platinum, or any other substance which, if it were of the required fineness, would be precious metal; or
(c) animals or plants.
The term 'precious metal' is defined in section 195-1 of the GST Act as:
precious metal means:
(a) gold (in an investment form) of at least 99.5% fineness; or
(b) silver (in an investment form) of at least 99.9% fineness; or
(c) platinum (in an investment form) of at least 99% fineness; or
(d) any other substance (in an investment form) specified in the regulations of a particular fineness specified in the regulations.
Goods and Services Tax Ruling GSTR 2003/10 discusses what is precious metal comprising of gold, silver or platinum.
Paragraph 10 of GSTR 2003/10 explains that to be a precious metal, a thing must be the metal gold, silver, or platinum of specified fineness, or a substance listed in the regulations.
Metals gold, silver or platinum of specified fineness can only be termed as precious metals if they are in investment form. The term 'investment form' is not defined in the GST Act. According to paragraph 14 of GSTR 2003/10 the expression 'investment form' takes its ordinary meaning from the context in which it is used. Colloquially, the expression can be defined as a form in which an item is capable of being held as an investment. While jewellery made of gold, silver or platinum may be held as an investment, the term must be read in the context of the precious metal provisions.
Paragraph 20 of GSTR 2003/10 further explains the expression 'in an investment form' means the metal must be in a physical form that is capable of being traded on the international market for that metal by traders in that metal in that market. The relevant traders are therefore the banks, bullion dealers, commodity brokers and stockbrokers that generally deal in gold, silver or platinum in the bullion market.
Bars, wafers and bullions are the physical forms in which the metals gold, silver and platinum are traded on the international bullion market for these metals.
Furthermore, to be tradeable on the international bullion market, the metal must bear some mark or characteristic on its face accepted by the market as identifying and guaranteeing its fineness and quality, for example a hallmark.
Also, the metal supplied in a tradeable form should be traded at a price that is determined by reference to the spot price of that metal to indicate that it is in an investment form.
Paragraph 25 of GSTR 2003/10 provides that while jewellery is often marked with whether it is 18, 20 or 24 carat etcetera, this is not a standard that is accepted on the international bullion market as guaranteeing the fineness or quality of the metal. Such a marking is not sufficient for the metal to be in an investment form. Also, jewellery is not traded on the international bullion market.
Gold jewellery is not in the physical form that is traded in the international bullion market and does not bear a hallmark. Consequently, gold jewellery is not excluded by paragraph (a) and (b) of the definition of second-hand goods in the GST Act.
You carry on an enterprise of buying second-hand gold jewellery. You purchase the gold jewellery from individuals that are not registered or required to be registered for GST.
You do not import the gold jewellery, divide it for sale or use it for the purpose of manufacture. Instead you on-sell the gold jewellery and this supply is a taxable supply.
As you satisfy the requirements of section 66-5 of the GST Act, you are entitled to apply Division 66 of the GST Act to the purchase of the gold jewellery. Hence, you are entitled to claim the input tax credits.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
