Edited version of your written advice

Authorisation Number: 1051407490303

Date of advice: 27 July 2018

Ruling

Subject: GST free supply of car parts

Question

Is the supply of a utility canopy to you a GST free supply of a car part?

Answer

No. The utility canopy is not a GST free supply of a car part.

This ruling applies for the following period:

From 1 January 2018

The scheme commences on:

1 January 2018

Relevant facts and circumstances

● You are a disabled veteran who holds a gold card.

● You are a veteran to whom section 24 of the Veteran’s Entitlements Act 1986 applies

● Previously you bought a utility vehicle GST- free as allowed by the law.

● Recently, you tried to buy a canopy for a utility you purchased GST- free.

● The vendor did not allow you to purchase the canopy GST- free and asked him to get back to them with advice from the ATO that the canopy was GST- free.

● You use the utility vehicle as personal transport.

● The canopy is not a modification for the vehicle to adapt it to be better used as part of your disability.

Relevant legislative provisions

Subsection 38-P of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

Subsection 38-505(1) of the GST Act

Subsection 38-505(4) of the GST Act

Part 6 of Chapter 4 of the Military Rehabilitation and Compensation Act 2004

Section 24 of the Veteran’s Entitlements Act 1986

Reasons for decision

Subdivision 38-P of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides concessions to disabled veterans to purchase cars and car parts GST-free.

Subsection 38-505(1) of the GST Act states:

A supply is GST-free if it is a supply of a car to an individual who:

(a) Has served in the Defence Forces or in any other armed force of Her Majesty; and

(b) As a result of that service:

i. Has lost a leg or both arms; or

ii. Has had a leg, or both arms, rendered permanently and completely useless; or

iii. Is a veteran to whom section 24 of the Veteran’s Entitlements Act 1986 applies and receives a pension under Part II of that Act; or

iv. Is receiving a Special Rate Disability Pension under Part 6 of Chapter 4 of the Military Rehabilitation and Compensation Act 2004, or satisfies the eligibility criteria in section 199 of that Act; and

(c) Intends to use the car in his or her personal transportation during all of the Subdivision 38-P period.

We accept that you meet the threshold eligibility tests to the extent that you meet subparagraphs 38-505 (1)(a), (b) and (c).

In addition as you are acquiring an item for the utility vehicle you purchased GST- free, the item can be GST-free if it is covered by subsection 38-505(4) which states:

a supply is GST-free if it is a supply of *car parts that are for a car for an individual to whom paragraphs (1)(a),(b) and (c) apply.

The primary question is whether the utility canopy falls within the definition of car parts described in subsection 38-505(4).

‘Car parts’ is defined in the GST Act. The definition at section 195-1 says:

"car parts", in relation to cars, includes:

(a) bodies for those cars (including insulated bodies, tank-bodies, and other bodies designed for the transport or delivery of goods or other property of particular kinds); and

(b) underbody hoists, and other equipment or apparatus of a kind ordinarily fitted to cars for use in connection with the transport or delivery of goods or other property by those road vehicles.

As the definition uses the word ‘includes’ it is defined inclusively which means it can be read in conjunction with the ordinary meaning of ‘car parts’.

The Macquarie Dictionary (5th ed 2012 online) defines 'part', relevantly for the present purposes, as:

1. a portion or division of a whole, separate in reality, or in thought only; a piece, fragment, fraction, or section; a constituent.

2. an essential or integral attribute or quality.

Further interpretative assistance can also be found in the way judges have in the past considered the terms. The cases of closest relevance have been about determining if a thing is a ‘part’ or something lesser than a ‘part’ such as an ‘accessory’.

In National Panasonic (Australia) Pty Ltd and Collector of Customs (NSW), Re (1985) 7 ALD 647; 3 AAR 156, the issue under consideration was whether video cassettes formed ‘part’ of the player or were a something lesser. It held that a video cassette should be seen as a single total entity in itself and not as part of the entity of the video recorder. Importantly, it held a ‘part’ is something necessary to the completion of an article, a “constituent or component part” — it is something forming part of a whole, rather than something being constantly withdrawn or replaced.

It also held a video cassette can also not be regarded as an “accessory” for a video cassette recorder. The very word “accessory” carries a connotation of something that is “added or attached for convenience”. It does not fit well with a notion of indispensability (and a video cassette is effectively indispensable to use of a video cassette recorder), and virtually assumes that the article is optional.

The meaning of the word ‘part’ has also been extensively considered in American customs cases. Typical of the approach in these cases is the following extract from the decision of the Court of Customs and Patent Appeals in United States v Willoughby Camera Stores Inc (1933) 21 CCPA 322, TD 46851 at 324, where it was stated, that: ‘It is a well-established rule that a “part” of an article is something necessary to the completion of that article. It is an integral, constituent, or component part, without which the article to which it is to be joined, could not function as such article …’

In considering this principle, Deputy Commissioner of Taxation v Polaroid Australia Pty Ltd (1971) 46 ALJR 32,

Gibbs J found:

one thing does not become part of another simply because the latter thing cannot be put to proper use without the aid of the former, even if, in use, the two things are fixed together. In my opinion a film is not part of a camera, nor a bullet of a gun, nor petrol of a motor vehicle.

As to ’accessories’ the learned judge said at 35:

The final question is whether the goods can be described as accessories for a camera. The ordinary dictionary meaning of accessory is an adjunct, which itself is defined as something joined to another, but subordinate, as auxiliary, or dependent upon it. It was because the Deputy Commissioner regarded the goods as essential to the use of a Polaroid camera that he preferred to submit that they

7 ALD 647 at 659

are parts rather than accessories. In my opinion, however, the goods in question cannot be regarded as accessories for a Polaroid camera. An accessory for a camera is an extra and additional part of the equipment of the camera itself, such as a light meter, a filter or a wide angle lens, and in the ordinary course of language a film would not be referred to as an accessory for a conventional camera, nor a film pack or a picture roll as an accessory for a Polaroid camera.

ATO ID 2014/11’ Income Tax Research and Development: building expenditure’ quotes and restates the principles of these cases where it says:

The word 'part' ordinarily connotes something which is a constituent or a component of a whole. A part is something which is essential to complete the whole.

The principles that we can take from these cases is that a part makes up a piece of the whole item, in this case a car. It must also be essential to the whole item. If we apply this to the definition of ‘car part’, where the definition says that they ‘include bodies for those cars’, it means those body pieces can only be ‘parts’ where they formed part of the original vehicle.

Where the item does not form part of the original vehicle, it is better considered to be of lesser importance and secondary to the original. Given that the utility canopy is not part of the original vehicle, and it is of secondary importance to the car, it is better described as an accessory.

As the utility canopy is not a car part, it is not GST free under section 38-505 of the GST Act.

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