Edited version of your written advice

Authorisation Number: 1051493964256

Date of advice: 14 March 2019

Ruling

Subject: GST and entitlement of refund for GST paid on taxable importation

Question 1

Are you entitled to claim back the GST paid on the taxable importation of the vessel owned by the overseas company, company A under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, you are not entitled to claim back the GST paid on the taxable importation of the vessel owned by the overseas company, company A under section 15-15 of the GST Act because you did not make a creditable importation of the vessel under section 15-5 of the GST Act.

Further you cannot claim a refund of the GST paid on the taxable importation under section 57-10 of the GST Act as company A is not registered and was not required to be registered for GST at the time the vessel was imported into Australia.

Question 2

If the answer to question 1 is no, can company A claim the GST paid on the importation of the Vessel in Australia under the GST Act?

Answer

No, company A cannot claim the GST paid on the importation of the vessel in Australia under section 15-15 of the GST Act because it is not registered and was not required to be registered for GST at that time and therefore did not make a creditable importation of the vessel under section 15-5 of the GST Act.

Relevant facts

You are an Australian company and registered for the goods and services tax (GST).

Company A is a company registered outside Australia. It is not registered for GST. It mainly owns a vessel with the purpose of participating in racing events all over the world with a managing yacht partner, Company B, a company located outside Australia.

Company A has provided you with written authorisation to act on its behalf regarding the importation of the vessel into Australia.

You have imported the vessel under your name, paid duty and GST to the Australian border. Company A has reimbursed you for the expenses you have paid regarding the importation of the vessel into Australia.

For all yacht racing events in Australia, company A has formed an alliance with a managing yacht partner company B to join the match. There is no written agreement between the two parties regarding the arrangement for participating in the races. They were each carrying their activities in their own right. Company A and company B are not related entities.

Company A provided the yacht and paid or reimbursed the expenses in relation to the yacht only. Company B supplied sponsorship to an overseas company, received the payment and was responsible for expenses related to the racing event. Company A did not charge compensation to company B and did not acquire any income from Company B.

When the vessel was in Australia, company A did not carry on any business activity in Australia. There was no income received from Australia during that period.

Company A did some advertisement for a related Australian company on the vessel during the racing events and did not receive any payments when providing the advertising services.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 15-5

A New Tax System (Goods and Services Tax) Act 1999 section 15-15

A New Tax System (Goods and Services Tax) Act 1999 section 57-10

Reasons for decision

Note: Where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in section 195-1 of the GST Act.

Question 1

Summary

You are not entitled to claim back the GST paid on the importation of the Vessel owned by company A under section 15-15 of the GST Act because you did not make a creditable importation of the vessel under sections 15-5 of the GST Act.

Further you cannot claim a refund of the GST paid on the taxable importation under section 57-10 of the GST Act as company A is not registered and was not required to be registered for GST at the time the vessel was imported into Australia.

Detailed reasoning

Under section 15-15 of the GST Act you are entitled to the input tax credit for any creditable importation that you make.

Under section 15-5 of the GST Act you make a creditable importation if:

a) you import goods solely for a creditable purpose; and

b) the importation is a taxable importation; and

c) you are registered or required to be registered for GST.

Under subsection 15-10(1) of the GST Act you import goods for a creditable purpose to the extent that you import the goods in carrying on your enterprise.

However under subsection 15-10(2) of the GST Act you do not import the goods for a creditable purpose to the extent that:

● the importation relates to making supplies that would be input taxed; or

● the importation is of a private or domestic nature.

Goods and Services Tax Ruling GSTR 2003/15 Goods and services tax: importation of goods into Australia provides guidance on creditable importation and the role of agents in relation to taxable and creditable importations.

In regard to creditable importation, paragraph 47 to 54 in GSTR 2003/15 state the following:

47. The first requirement for an entity to make a creditable importation is that the entity imports the goods. Consistent with the scheme of the Act that only one entity can claim the input tax credit on a creditable acquisition or creditable importation, there can be only one entity that imports the goods within the meaning of Division 15.

48. For a taxable importation under Division 13, the entity that enters goods for home consumption is not necessarily the entity that imports them. The act of entering goods through Customs does not in itself equate to importing goods.

49. The entity that imports goods within the meaning of Division 15, in the context of a taxable importation under Division 13, is the entity that:

a) causes the goods to be brought to Australia for application to its own purposes after importation, whether by way of supply, use, or otherwise; and

b) completes the customs formalities for the entry of the goods for home consumption.

50. The entity that causes goods to be brought to Australia is identified by looking to the purpose for which the goods are brought here. The entity whose purpose it is to apply the goods by way of supply, use or other application to its purposes after importation is the entity that causes the goods to be brought to Australia.

51. An entity causes goods to be brought to Australia to apply them to its own purposes by way of supply, use or other application where, for example, it:

i. arranges for goods that it owns to be sent to Australia so that it can use them in Australia;

ii. places an order with a foreign supplier for goods, for use as trading stock, to be sent to Australia;

iii. sends or arranges for goods to be sent to Australia to sell, lease or hire them in Australia; or

iv. sends or arranges for goods to be sent to Australia for the entity to retain as a collector's piece or for investment

52. Goods are commonly applied to the purpose of an entity when used in a manner consistent with their design or nature, or for the purpose for which the goods are intended to be, or capable of being, used. For example, an item of mining equipment is applied by the entity that uses the equipment for mining. An entity that transports the equipment to Australia and/or provides storage does not apply it in a manner consistent with its design or the purpose for which it is intended to be used. The transporting entity does not cause the equipment to be brought to Australia in this context, even though it is responsible for the physical transporting of the equipment.

53. The importing entity commonly acquires the ability to apply goods to its own purposes by giving consideration commensurate with the value of the goods, where an entity buys the goods, or commensurate with the value of the rights obtained in respect of the goods, where an entity rents or hires goods. Typically, the entity that imports the goods buys them from an overseas source and either uses or consumes the goods in Australia, or re-sells them.

54. An entity completes the customs formalities where the entity makes a taxable importation by entering the imported goods for home consumption. An entity either enters goods itself, including through an employee, engages a customs broker, or appoints an agent to enter goods on the entity's behalf (in which case the agent is likely to engage a customs broker).

From the information given, you do not own the vessel despite being named as the owner of the imported vessel in the Customs Declaration and did not cause the vessel to be brought to Australia for application to your own purposes after importation whether by way of supply, use or otherwise.

In this instance you have not made a creditable importation under section 15-5 of the GST Act and therefore you are not entitled to claim a refund of the GST paid on the taxable importation of the vessel under section 15-15 of the GST Act.

You have written authority from Company A to act on its behalf for the importation of the vessel in Australia. In this instance it is relevant to consider Division 57 of the GST Act.

Paragraphs 40 and 65 to 70 in GSTR 2003/15 state:

40. A non-resident entity makes a taxable importation through an Australian resident agent where the non-resident appoints the agent to lodge the import declaration and the resident agent is entered as 'owner' on the import declaration. As noted in paragraph 33, an agent may be the 'owner' for import declaration purposes

65. Thirdly, an Australian resident agent of a non-resident principal is entitled, under Division 57, to the input tax credits for creditable importations made by the non-resident through the agent.

66. The non-resident entity must make a creditable importation. That is, the non-resident must import the goods into Australia for a creditable purpose, the importation must be a taxable importation and the non-resident must be registered, or required to be registered.

67. A creditable importation is made through the resident agent where the resident agent has the authority to clear the goods through Customs on behalf of the non-resident, and the resident agent is entered as 'owner' on the import declaration. The resident agent, which might, for example, be an Australian subsidiary of a non-resident company, would normally engage a customs broker.

68. A creditable importation may be made through a customs broker as a resident agent. This occurs where the broker is appointed to enter the goods as an 'owner', in the capacity as agent for the non-resident. However, an importation is not made through a customs broker as resident agent where the customs broker merely prepares and lodges the import declaration for a non-resident who is named as the owner on the declaration.

69. A resident agent is not entitled to an input tax credit under section 57-10 merely because it is liable to pay the GST under section 57-5 on a taxable importation of the goods. A credit entitlement exists only if the non-resident makes a creditable importation through the agent. That is, the non-resident must satisfy the requirements of section 15-5.

70. If a creditable importation is made through a resident agent, the agent needs to be able to demonstrate that there is an agency relationship, and that the requirements for a creditable importation are met.

When company A appointed you to lodge the import declaration and you were entered as ‘owner’ on the import declaration, company A has made the taxable importation through you as an Australian resident agent.

In this instance you, as the resident agent, are liable to pay the GST on the taxable importation and not company A under section 57-5 of the GST Act. You are also entitled to claim a refund of the GST paid on the importation under section 57-10 of the GST Act where company A has made a creditable importation of the vessel under section 15-5 of the GST Act.

Has company A made a creditable importation?

Under section 15-5 of the GST Act you make a creditable importation if:

a) you import goods solely or partly for a creditable purposes; and

b) the importation is a taxable importation; and

c) you are registered or required to be registered for GST.

From the facts given, company A is not registered for GST. We will now determine if company A was required to be registered for GST when the importation took place.

Under section 23-5 of the GST Act you are required to register for GST if you are carrying on a business and your annual turnover meets the GST registration threshold of A$75,000 or more.

From the facts given, company A did not carry any business activity in Australia and did not receive any income when the vessel was in Australia. In this instance company A was and is not required to be registered for GST. Paragraph 15-5 (c) of the GST Act is not satisfied. Company A has not made a creditable importation of the boat under section 15-5 of the GST Act.

As company A has not made a creditable importation you cannot claim the GST paid on the taxable importation under section 57-10 of the GST Act.

Question 2

Summary

Company A cannot claim the GST paid on the importation of the Vessel in Australia under section 15-15 of the GST Act because it did not make a creditable importation of the vessel under section 15-5 of the GST Act when the importation was done.

Detailed reasoning

Under section 15-15 of the GST Act you are entitled to the input tax credit for any creditable importation that you make under section 15-5 of the GST Act.

One of the requirement of a creditable importation under section 15-5 of the GST Act is the entity must be registered or required to be registered for GST.

Company A is not registered for GST and was not required to be registered for GST at the time the importation was made. In this case company A had not made a creditable importation of the vessel under section 15-5 of the GST Act.

Company A is therefore not entitled to a refund of the GST you paid on the importation of the vessel on its behalf under section 15-15 of the GST Act.

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).