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Ruling
Subject: GST, second hand goods and tax invoice
Question
Are you required to hold a valid tax invoice to claim input tax credits for the purchase of second hand mobile phones where the suppliers are not registered for GST?
Answer
No. You are not required to hold a valid tax invoice to claim input tax credits for the purchase of second hand mobile phones where the suppliers are not registered for GST. However, you must prepare a record that contains certain information to substantiate acquisitions of a value of more than $75.
Relevant facts and circumstances
You are an Australian entity registered for GST.
You are in the business of selling mobile phones.
Due to stock shortage, you acquire second hand mobile phones from individuals who are not registered for GST.
You acquire the mobile phones for the purpose of resale.
You pay the individuals a set price for their mobile phone.
The individuals provide you with a mobile phone contract and/or delivery docket which they obtained from their mobile phone service provider.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 66-5.
A New Tax System (Goods and Services Tax) Act 1999 section 66-17.
A New Tax System (Goods and Services Tax) Act 1999 subsection 29-10(3).
Reasons for decision
Normally, you must hold a valid tax invoice from the supplier before you can claim any input tax credit (ITCs). However, a valid tax invoice will not be available where the supplier is not registered for GST.
Under paragraph 66-17(1)(a) of the GST Act, if you make a creditable acquisition of second-hand goods and the supply of the goods to you was not a taxable supply, subsection 29-10(3) applies to the acquisition as if references to a tax invoice were references to a record you prepared that complies with this section.
Under subsection 66-17(2) of the GST Act, to comply with this section, the record must:
· set out the name and address of the entity that supplied the goods to you; and
· describe the goods (including their quantity); and
· set out the date of, and the consideration for, the acquisition.
In your case, the individuals provide you with a mobile phone contract and/or delivery docket. These documents may contain the name and address of the individual that supplied the mobile phone to you. It may also describe the goods including their quantity. However, these documents alone do not set out the date that you purchased the mobile phone from the individual and the amount you paid the individual.
Therefore, you must prepare a record that contains the information as set out above under subsection 66-17(2) of the GST Act. The record must be prepared by you to substantiate acquisitions of a value of more than $75.
Additional information
There are special rules that apply to claiming ITCs on the purchase of second hand goods from unregistered entities. A copy of the publication 'GST and second-hand goods - completing your activity statement' (NAT 10817) is enclosed for information regarding these special rules.
Goods and Services Tax Advice GSTA TPP 007 provide further explanations and examples on the calculation of ITCs. We have also enclosed a copy for your information.
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