| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051484451644
Date of advice: 15 February 2019
Ruling
Subject: GST and input tax credits
Question
Are you entitled to an input tax credit pursuant to section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 in respect to your acquisition of property situated at a specified location?
Answer
Yes
This ruling applies for the following period:
X XXXX 20XX – 30 June 20YY
The scheme commences on:
XX XXXX 20XX
Relevant facts and circumstances
You are registered for GST effective from xx/xx/xxxx.
On xx/xx/xxxx you entered into a Contract for the sale and purchase of land (Sale Contract) with ABC Pty Limited (Vendor) to purchase property situated at a specified location (the Property).
The Sale Contract states the purchase price of the Property is $x,xxx,xxx (inclusive of GST). The Sale Contract also states the price includes GST of $xxx,xxx.
The Vendor declined to treat the transaction as a sale of going concern.
The Property is a commercial property consisting of a showroom and workshop.
The Property is currently leased. The Lessee operates a business and workshop on the Property. The Lessee has agreed with you to continue occupation of the Property after settlement.
You have provided a draft copy of the lease between you (as Lessor) and the existing Lessee for a term of 5 years with a further two options for five years each.
Settlement was due to occur by xx/xx/xxxx.
You are currently unable to complete the transaction owing to a lack of funding of the GST component of the acquisition price.
A financial institution has indicated their willingness to provide you with short-term funding for the GST component on the basis that you receive a Private Ruling confirming your entitlement to an input tax credit (ITC) of $xxx,xxx.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999
Section 11-5
Paragraph 11-5(a)
Paragraph 11-5(b)
Paragraph 11-5(c)
Paragraph 11-5(d)
Section 11-20
Section 11-25
Reasons for decision
Note: In this reasoning, unless otherwise stated,
● all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
● reference material(s) referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au
Section 11-20 provides that you are entitled to an ITC for any creditable acquisition that you make.
Section 11-5 defines the term ‘creditable acquisition. 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 for GST.
The meaning of the term ‘creditable purpose’ is contained in section 11-15. You will acquire a thing for a ‘creditable purpose’ to the extent you acquire it in carrying on your enterprise. However, you will not acquire the thing for a ‘creditable purpose’ to the extent that the acquisition relates to making input taxed supplies or is of a private or domestic nature.
In this case you will acquire the Property in carrying on your enterprise of supplying commercial property by way of lease. The supply of commercial property by way of lease is not an input taxed supply. Furthermore the acquisition of the Property is not considered to be private or domestic in nature. As such we consider the acquisition of the Property will be for a ‘creditable purpose’ thus satisfying paragraph 11-5(a).
The Sale Contract states the price is $x,xxx,xxx (inclusive of GST) with GST being an amount of $xxx,xxx satisfying paragraphs 11-5(c) and 11-5(b) respectively. Furthermore you are registered for GST (paragraph 11-5(d)).
Given the above you will make a creditable acquisition when you acquire the Property. As such, you are entitled to an ITC pursuant to section 11-20.
Section 11-25 provides that the amount of the ITC is an amount equal to the GST payable on the supply of the thing acquired. However, the amount of the ITC is reduced if the acquisition is only partly creditable.
The Sale Contract indicates the GST payable on the supply of the Property to you is $xxx,xxx. Given the facts of this case you will acquire the Property solely for a ‘creditable purpose’. Consequently you will be entitled to an ITC equal to the amount of GST payable on the supply.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
