Edited version of private ruling

Authorisation Number: 1011598159011

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Ruling

Is the supply of a vehicle by way of tender to an employee subject to Goods and Services Tax (GST)?

Yes.

Relevant facts and circumstances

You are registered for GST.

You have been endorsed by the Australian Tax Office as a charity.

You supply motor vehicles (vehicles) by way of tender to organisations belonging to a particular industry type (Organisations) and your employees.

The vehicles are your fleet vehicles and are changed over after several years.

Only the Organisations and your employees can tender to purchase a vehicle.

Once in the tender process, your employees do not get preferential treatment.

If a vehicle is sold to an Organisation for an amount that is less than 75% of the original purchase price then the vehicle is sold GST-free as per the nominal consideration rules provided by the A New Tax System (Goods and services Tax) Act 1999 (GST Act), otherwise GST is levied.

If a vehicle is sold to an employee then you levy GST regardless of the sale price.

You remit the GST levied to the Australian Tax Office.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5.

A New Tax System (Goods and Services Tax) Act 1999 section 38-250

Reasons for decision

Summary

A vehicle sold to an employee by way of a tender process is taxable regardless of the sale price.

Detailed reasoning

Under section 9-5 of the GST Act, you make a taxable supply if:

· you make the supply for consideration

· the supply is made in the course or furtherance of an enterprise that you carry on

· the supply is connected with Australia, and

· you are registered, or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

In your case, you are supplying vehicles (by way of sale) in the course of your enterprise. The supply is connected with Australia as the vehicles are sold in Australia and you are also registered for GST. Hence under the general provisions of the GST Act you would be making a taxable supply of the vehicles.

There are no provisions in the GST Act or any other Act that would allow the sale of the vehicles to be input taxed, however, under section 38-250 of the GST Act (nominal consideration rules), supplies made by a charitable institution for nominal consideration will be GST-free provided certain conditions are satisfied.

The Australian Tax Office view on the nominal consideration rules is contained in the publication Charities Consultative Committee Resolved issues document (available from the website www.ato.gov.au ). Part 3 of this document (Non-Commercial Activities of Charities, Cost of Supply and Market Value Tests) discusses the non-commercial activities of charitable institutions under section 38-250 of the GST Act. In accordance with Part 3 of this document, any supply (other than accommodation) made by a charitable institution, trustee of a charitable fund, gift deductible entity or government school is GST-free where either of the following conditions is satisfied:

· the consideration received is less than 50% of the GST inclusive market value of the supply, or

· the consideration received is less than 75% of the consideration provided by the entity in acquiring the thing supplied.

Sale of vehicles

In your case, you are a charity that has been endorsed by the Australian Tax Office. You sell vehicles to organisations and your employees by way of tender. In the tender process, if a vehicle is sold to an organisation for an amount less than 75% of the original purchase price then the vehicle is sold GST-free in accordance with the second dot point above, otherwise GST is levied. In the case where your employee successfully tenders for a vehicle, you do not apply the nominal consideration rules and GST is levied regardless of the vehicle's selling price.

In all cases where GST is levied, it is remitted to the Australian Tax Office.

Sale of a vehicle to an employee

Part 8 of the Charities Consultative Committee Resolved issues document indicates that when a charity purchases a vehicle, and subsequently transfers it to an employee in return for a payment that is less than the market value of the vehicle at the time of transfer, such a supply of the vehicle will not be GST-free. This is because the consideration will include the services provided by the employee in addition to the cash payment, and consequently will not satisfy either of the above dot points. The value of the services will equal the discount to the market value provided by the charity.

It therefore follows that the sale of a vehicle to your employee in return for a payment (albeit the sale is a result of a tender process) would be taxable given the nominal consideration rules cannot be applied and the requirements of section 9-5 of the GST Act are all satisfied.

Hence, you are correctly applying the GST provisions when you sell by tender a vehicle to an employee, that is, the supply of the vehicle to your employee is subject to goods and services regardless of the sale price.