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Edited version of your written advice
Authorisation Number: 1013105475280
Date of advice: 11 October 2016
Ruling
Subject: Whether you are entitled to input tax credits based on the full Agreed Price under your arrangements for used goods
Question 1
Are you entitled to input tax credits on the full Agreed Price of used goods that you acquire from a dealer (Dealer) under your specific arrangements, notwithstanding that you withhold a security deposit from the amount you pay to the Dealer?
Answer
Yes. The amount of input tax credits you are entitled to is determined under section sections 11-25, 9-70 and 9-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where price is the full Agreed Price.
Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you are entitled to the input tax credit for any creditable acquisition that you make.
The acquisition by you of the used goods subject to specific condition is a creditable acquisition under section 11-5 of the GST Act because:
• you acquire the used goods solely for a creditable purpose,
• the supply of the used goods by the Dealers to you is a taxable supply,
• you provide or are liable to provide the Agreed Price as consideration, and
• you are registered for GST.
The Specific Agreement describes an arrangement under which
• The Dealer sells used goods to you,
• You supply limited rights over the used goods to the Dealer to hold and display the goods for sale until such time as a customer is found.
• The dealer takes possession of the goods under the specific arrangement and pays regular fees under this arrangement.
• When a customer is found, the goods are purchased by the Dealer, who will then be invoiced and liable to pay for them. The Dealer is now in a position to sell the goods to the customer.
Clause 11.2 of the Specific Agreement states in part that you may:
….. retain from any amount it is to pay to the Dealer under this Agreement any amount required to ensure that immediately after that payment the security deposit referred to in clause 11.1 is maintained at the required amount.
The security deposit satisfies the requirements of paragraph 20 of Goods and Services Tax Ruling GSTR 2006/2 Goods and services tax: deposits held as security for the performance of an obligation and as such is a security deposit for the purposes of Division 99 of the GST Act.
Where an amount for the security deposit is set off against the Agreed Price for used goods this does not reduce the consideration for the supply of the used goods, in accordance with the view in:
• Goods and Services Tax Ruling GSTR 2000/10 Goods and services tax: recipient created tax invoices in paragraphs 50 and 51, and
• Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration in paragraphs 35 and 36.
This is also in accordance with the Relevant Industry Partnership - issues register Issue 1.f.
Under sections 9-70 and 9-75 of the GST Act, the amount of input tax credits that you are entitled to is 10% of the value of the supply which is either:
• price x 10/11, or
• for a luxury vehicle - luxury vehicle tax value x 10/11
where price is the consideration for the supply which is the Agreed Price.
The amount of input tax credits you are entitled to for the creditable acquisition of a certain vehicle may be limited under section 69-10 of the GST Act.
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 registered for GST.
You have been entering into specific agreements with dealers (Dealers) for several years as part of your enterprise.
You have provided a copy of your standard Agreement.
You have provided a copy of another Private Ruling issued for another entity (Ruling).
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• Division 99
• Section 9-70
• Section 9-75
• Section 11-20
• Section 11-25
• Section 69-10
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