Edited version of private advice

Authorisation Number: 1012679333050

Ruling

Subject: GST and creditable acquisition and Division 165.

Question 1

Are you entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for supplies of services acquired by you in carrying on your enterprise?

Answer

Yes, you are entitled to an input tax credit under section 11-20 of the GST Act if the supply of the services acquired by you is from a GST registered entity and you hold a valid tax invoice.

You will not be entitled to an input tax credit for a supply of services acquired from an entity that is not registered for GST.

Question 2

Do the general anti-avoidance provisions in Division 165 of the GST Act apply to the amendments to the rules which ensure that the legal entitlement to prize money is allocated between the different entities?

Answer

No. It is considered that this particular scheme/arrangement with its unique set of facts and evidence does not attract the application of Division 165.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

• You are an Australian government entity, established under a particular State Act, and are responsible for promoting and controlling a particular industry in your State.

• You are registered for the goods and services tax (GST).

• You control a particular industry across your State, through a number of local clubs. Prize money is awarded in respect of winning (and placing) in particular events. In the industry, there are two main entities most responsible for the certain participation in the event.

• Under the current Rules, the payment of any prize money awarded in relation to a winner or place getter may be paid to either of these entities.

• The payment of prize money by you is governed by the Rules.

• In recognition of the role of the particular entity, and in order to bring you into line with current industry practice and the practice for the industry interstate, you propose to amend the Rules, so that X% of prize money is paid to a particular entity for a winning participant and X% is paid to the remaining entity for a winning participant.

• You wish to make clear each party's entitlement to prize money, in a way that is consistent with other similar codes in which prize money is specifically allocated between the various parties.

• You contend that the lack of clarity which exists currently results in a competitive disadvantage for your industry, compared to the rest of the broader industry.

• As a consequence of the change:

(a) A particular entity that is registered for GST (who constitute a small proportion of all entities) will be liable for GST on their share of prize money; and

(b) you will become entitled to claim an input tax credit in respect of the payment to a GST registered entity.

• Your entitlement to an input tax credit may have an incidental impact to the financial outcome for some entities that are not registered for GST.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Section 9-5

Section 11-5

Subsection 11-15

Section 11-20

Division 165

Reasons for decision

Question 1

Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes.

Under section 11-5 of the GST Act 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.

Under subsection 11-15(1) of the GST Act you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

However, under subsection 11-15(2) of the GST Act, you do not acquire the thing for a creditable purpose to the extent that:

• the acquisition relates to making supplies that would be input taxed (for example, financial supplies, supplies of residential premises); or

• the acquisition is of a private or domestic nature.

From the information received, when you acquire the services from a particular entity, paragraphs (a), (c) and (d) of section 11-5 of the GST Act are satisfied as:

• you acquire the supplies for a creditable purpose since you acquire the supplies while carrying on your enterprise;

• you provide consideration for the supplies; and

• you are registered for GST.

The next step is to determine whether these supplies to you are taxable supplies. Where the supplies are taxable supplies, paragraph (b) in section 11-5 of the GST Act will be satisfied and the acquisitions will be creditable acquisitions under section 11-5 of the GST Act.

Taxable supply

To be a taxable supply under the GST Act, the supply must meet the conditions in section 9-5 of the GST Act. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Acquisition of services from an entity that is registered for GST in Australia

The supplies of services from the GST registered entity (suppliers) will satisfy paragraphs (a) to (d) of section 9-5 of the GST Act as:

(a) the supplies are made for consideration;

(b) the supplies are made in the course of an enterprise that the suppliers are carrying on;

(c) the supplies are connected with Australia as the suppliers are carrying on their enterprise in Australia; and

(d) the suppliers are registered for GST.

There is no provision under the GST Act that makes the services supplied to an Australian entity GST-free or input taxed. Accordingly the supply of services by a GST registered entity is a taxable supply under section 9-5 of the GST Act and paragraph (b) in section 11-5 of the GST Act is satisfied.

Your acquisition of the services from a GST registered entity is therefore a creditable acquisition under section 11-5 of the GST Act as all the requirements in that section are satisfied.

Please note that under subsection 29-10 (3) of the GST Act, to attribute an input tax credit to a particular tax period, generally you must hold a valid tax invoice.

Acquisition of services from an entity that is not registered for GST in Australia

The supplies of services from entities that are not registered for GST will satisfy paragraphs (a) to (c) of section 9-5 of the GST Act as:

(a) the supplies are made for consideration;

(b) the supplies are made in the course of an enterprise that the trainers are carrying on;

(c) the supplies are connected with Australia as the trainers are carrying on their enterprise in Australia;

However paragraph (d) will not be satisfied as these entities are not registered for GST.

Accordingly the supply is not a taxable supply under section 9-5 of the GST Act as all of the paragraphs under section 9-5 of the GST Act are not satisfied.

As the supply of services by the entities that are not registered for GST are not a taxable supply, paragraph (b) in section 11-5 of the GST Act is not satisfied.

Accordingly, your acquisition of services from an entity that is not registered for GST will not be a creditable acquisition under section 11-5 of the GST Act as all the requirements in that section are not satisfied.

Question 2

You have requested that the Commissioner consider whether Division 165 of the GST Act (anti-avoidance provisions) applies to the arrangement described in your private ruling request and accompanying documentation. Division 165 must be considered on a case by case basis to determine whether it would be concluded that the dominant purpose or principal effect of the scheme would be to get a GST benefit. This requires an objective assessment of the scheme against the twelve matters set out in subsection 165-15(1).

It is considered that this particular scheme/arrangement with its unique set of facts and evidence is not sufficiently artificial or contrived to attract the application of Division 165.

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