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Edited version of private advice
Authorisation Number: 1012649541904
Ruling
Subject: Claiming input tax credits
Question
Is the Family trust (the Trust) entitled to claim an input tax credit on the purchase of the property?
Answer
At this stage, there is not enough evidence to suggest that the supply of the property to the Trust was a taxable supply. Accordingly, based on the facts provided, we are unable to make a decision regarding whether the Trust is entitled to claim input tax credits.
Provided the supply of the property (or a part of the property) was a taxable supply, the Trust is entitled to claim input tax credits to the extent the taxable supply is for a creditable purpose. The Trust must hold a valid tax invoice to attribute the relevant amount of input tax credits.
Relevant facts and circumstances
• You are a trust who has been leasing the property.
• The property consists of a residential part and a commercial part. The commercial part of the property was used to carry on an enterprise by you. The trustees of the trust in their personal capacity used the other part as their principal place of residence.
• The two individual trustees, entered into a contract to purchase the property (both the shop and residential premises) from the purchasers.
• Although the individuals intended to purchase the property in their capacity as the trustees of the Trust, the contract of sale does not indicate this.
• Loan documents in regards to financing the purchase of the property reflect that the individuals have purchased the property in their capacity as the trustees of the Trust.
• The trust deed of the Trust states that the Trustee may register assets in the name of a nominee.
• A resolution can be executed to the effect that the individuals have purchased the commercial shop part of the property in their capacity as the trustee of the Trust.
• The seller is yet to assess whether the supply of the property (or any part of the property) is a taxable supply.
• The seller has not issued a tax invoice for the supply of the property as yet.
• The contract of sale of the property states that unless otherwise specified in the contract, the Purchase Price includes any GST payable on the supply of the property to the Buyer. Accordingly, the purchaser is not required to pay any extra amount other than what is stated as the 'Purchase Price' of the property.
Relevant legislative provisions
Section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
Reasons for decision
You are entitled to claim input tax credits on creditable acquisitions that you make.
The first issue here is determining who made the acquisition of the property. That is, whether the purchase was made by the individuals in their capacity as the trustees of the Trust or in their personal capacity. We have been provided with documentary evidence such as the loan document issued by the bank and statements as part of this ruling application which prove, that the two individuals purchased the property in their capacity as the trustees of the Trust. On that basis, where you have made a creditable acquisition of the property, you are entitled to claim input tax credits attributable to that creditable acquisition.
What is a creditable acquisition?
A creditable acquisition is defined in section 11-5 of the GST Act as follows:
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.
(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)
To the extent that the property is purchased for the purpose of carrying on your enterprise, it is for a creditable purpose.
At this stage, as the supplier has advised that they have not assessed whether the supply of the property to you was a taxable supply, we are unable to state whether the supply of the property (or any part of the supply) meets paragraph 11-5(b) of the GST Act.
You advise that you are liable to provide consideration for the acquisition and you are registered for GST.
However, as there is currently insufficient information to assess whether the supply of the property to you was a taxable supply, we are unable to advise you whether you have made a creditable acquisition of the property.
In the event that full or a part of the property to you was a taxable supply, to the extent that you use the taxable portion in the carrying on of your enterprise, to that extent the acquisition of the property is a creditable acquisition. Accordingly, you are entitled to claim an input tax credit as follows:
Full input tax credits X extent of the creditable purpose
Please note that you are required to hold a valid tax invoice in order to attribute the relevant amount of input tax credits.
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