ATO Interpretative Decision
ATO ID 2001/471 (Withdrawn)
Goods and Services Tax
GST and trade-in of motor vehicle partly used for businessFOI status: may be released
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This ATO ID is withdrawn as it is superseded by NAT 4629 - GST and motor vehicles.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a sole trader, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it trades in a motor vehicle that it has used partly for business purposes?
Decision
Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it trades in a motor vehicle that it has used partly for business purposes.
Facts
The entity is a sole trader carrying on an enterprise. The entity is trading in its vehicle for another vehicle.
The entity used the vehicle partly for private and partly for business purposes. The replacement vehicle will be used in the same way.
The entity is registered for the goods and services tax (GST) and the supply is made in Australia.
Reasons for Decision
Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply.
Under section 9-5 of the GST Act, an entity makes a taxable supply if:
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- the supply is for consideration;
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- the supply is made in the course or furtherance of an enterprise that the entity carries on;
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- the supply is connected with Australia; and
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- the entity is registered, or required to be registered.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
In this case, the consideration received for the supply of the vehicle is the difference between the price of the replacement vehicle and the amount of other consideration (for example cash) provided for the replacement vehicle.
The supply is made in Australia and the entity is registered for GST.
The question in this case is whether the trade-in is a supply made in the course or furtherance of the entity's enterprise. From the facts it is evident that the supply is made in connection with the enterprise, and/ or for the purpose or object of achieving the enterprises goals. Therefore, the trade in of the vehicle is a supply made in the course or furtherance of the entity's enterprise.
As such, the trade in of the motor vehicle satisfies all of the positive limbs of section 9-5 of the GST Act.
The supply of the vehicle is not GST-free under Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act, when it trades in a motor vehicle used partly for business purposes.
The GST payable is 1/11th of the consideration received for the trade-in.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 38
Division 40
section 132-5
Keywords
Goods and services tax
GST supplies and acquisitions
Taxable supply
ISSN: 1445-2782
| Date: | Version: | |
| 22 August 2001 | Original statement | |
| You are here | 15 June 2007 | Archived |