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Edited version of private ruling
Authorisation Number: 1011694104067
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Ruling
Subject: GST and input tax credits
Question 1
Is entity A entitled to input tax credits (ITCs) for the acquisitions of motor vehicle related expenses and a motor vehicle?
Answer
Yes, entity A is entitled to ITCs in respect of the acquisitions of motor vehicle related expenses and a motor vehicle.
Relevant facts and circumstances
Entity is registered for GST
Entity A was established to provide support to a medical centre.
Initially the only income of the entity was donations but since incorporation it now also derives interest income.
The only expenses incurred by entity A were administrative expenses.
As the only income was from donations and interest there was no entitlement to ITCs.
Entity A has now entered into a memorandum of understanding (MOU) with entity B to provide patient transport services.
The transport was used for those patients who had difficulty in getting to the medical centre.
To enable these transport services to be provided and in accordance with the MOU, entity A was responsible for acquiring vehicles to be used for this purpose.
In accordance with the MOU entity B was to provide the drivers for the service.
Entity A entered into agreements with entities C and D whereby entity A was provided with vehicles on loan from both these organisations.
As part of these agreements entity A was responsible for all running expenses for those vehicles (including services and fuel).
Entity A has now also purchased a vehicle in its own right.
All costs for the purchase of the vehicle and services for each of the vehicle have been paid by entity A.
The MOU and copies of the loan agreements for the cars from entities C and D along with the purchase agreement for a vehicle have been provided.
Reasons for decision
Summary
Entity A is entitled to input tax credits for the acquisition of motor vehicle services and the motor vehicle as the acquisitions were made in carrying on entity A's enterprise.
Detailed reasoning
An entity is entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it makes a creditable acquisition.
Section 11-5 of the GST Act provides that;
'You make a creditable acquisition if:
(a) you acquire anything solely or partly for a *creditable purpose; and
(b) the supply of the thing to you is a *taxable supply; and
(c) you provide, or are liable to provide, *consideration for the supply; and
(d) you are *registered, or *required to be registered.'
Whether or not you can claim ITCs in relation to the purchase of the car and the car expenses will depend on whether or not you satisfy all the elements of section 11-5 of the GST Act.
Addressing each of these criteria to your situation:
(a) Creditable purpose
The meaning of creditable purpose is provided for in section 11-15 of the GST Act and states:
(1) You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.
(2) However, you do not acquire the thing for a creditable purpose to the extent that:
(a) the acquisition relates to making supplies that would be *input taxed; or
(b) the acquisition is of a private or domestic nature.
(3) An acquisition is not treated, for the purposes of paragraph (2)(a), as relating to making supplies that would be *input taxed to the extent that the supply is made through an *enterprise, or a part of an enterprise, that you *carry on outside Australia.
* denotes a defined term in the GST Act.
Entity A has acquired the vehicle and fuel and services on the vehicle in the carrying on the enterprise of the entity A.
b) Taxable supply
GST is a broad-based tax of 10 per cent on most taxable goods and services consumed in Australia. To be a taxable supply the supply must meet the conditions under section 9-5 of the GST Act. This section states:
You make a taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and
(c) the supply is *connected with Australia; and
(d) you are *registered, or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
* denotes a defined term in the GST Act.
Entity A has acquired taxable supplies as the vehicle and fuel and services on the vehicle are from entities whose supplies meet all the requirements of section 9-5 of the GST Act.
(c) Consideration
Entity A provided the consideration for the vehicle and fuel and services on the vehicle in respect of the cost of the acquisitions. Therefore, the supply will meet the requirement under paragraph 11-5(c) of the GST Act.
(d) Registered for GST
The entities that have provided you with these supplies must be registered for GST.
Where you carry on an enterprise and the acquisition is not for making input tax supplies and neither is the acquisition for a domestic or private nature, it will be for a creditable purpose and paragraph 11-5(a) of the GST Act will be satisfied.
The documentation you have provided to support your submission indicates that the suppliers of services and the motor dealer you purchased the motor vehicle from are registered for GST. A check of the Australian Business Register confirms this.
The entity acquiring an acquisition for use in their enterprise and providing payment or being liable to provide payment is entitled to the input tax credit. In this situation, it is entity A that is making the acquisition and clearly provides the consideration.
The acquisitions in this instance are for use in entity A's enterprise and are creditable acquisitions under section 11-5 of the GST Act.
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