Edited version of private ruling

Authorisation Number: 1011601467419

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Subject: Claim of input tax credit on the acquisition of a second hand yacht

Question

Are you entitled to claim a reimbursement of the input tax credit, under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), on your acquisition of a second hand yacht (yacht) in Australia? If so, how do you apply for the reimbursement?

Answer

No, you are not entitled to claim any input tax credit on the acquisition of your yacht.

Relevant facts and circumstances

You operate an enterprise in a foreign country. You are not registered for goods and services tax (GST) in Australia and do not have an Australian Business Number (ABN).

Recently, you entered into a contract with an Australian supplier to purchase a second hand yacht. The contract has already been settled.

The supplier has used this yacht in their enterprise of providing cruises. The supplier was registered for GST. The supplier expected you to export the yacht from Australia under its own power within 60 days after taking possession of it.

Your director has confirmed that he will export the yacht from Australia under its own power within 60 days after taking possession of the yacht, by navigating it out of Australia.

The supplier has considered the sale of the yacht to you as a GST-free export under item 3 of subsection 38-185(1) of the GST Act. Therefore, the supplier did not provide a tax invoice to you quoting the GST included in the price. Also the contract does not quote any GST included in the price.

You consider that the price was GST inclusive and you are entitled to claim a reimbursement of the relevant input tax credit.

Reasons for the decision

Section 11-20 of the GST Act provides that you are entitled to the input tax credit for any creditable acquisition that you make.

Section 11-5 of the GST Act provides that you make a creditable acquisition if:

· you acquire anything solely or partly for a creditable purpose; and

· the supply of the thing to you is a taxable supply; and

· you provide or are liable to provide consideration for the supply; and

· you are registered or required to be registered.

Section 9-5 of the GST Act provides that you make a taxable supply if:

· you make the supply for consideration; and

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

· the supply is connected with Australia; and

· you are 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.

Item 3 of subsection 38-185(1) of the GST Act provides that a supply of an aircraft or ship is GST-free, if the recipient of the aircraft or ship exports it from Australia under its own power within 60 days or such further period as the Commissioner allows, after taking the physical possession of it.

Subsection 195-1 of the GST Act defines that a ship means any vessel used in navigation, other than air navigation. Under this definition a yacht is a ship. Therefore, the provisions of item 3 of subsection 38-185(1) of the GST Act apply to the acquisition of your yacht.

Goods and Services Tax Ruling GSTR 2002/6 (ruling) refers to exports of goods under items 1-4 of the table in subsection 38-185(1) of the GST Act. Paragraph 55 of the ruling provides that the recipient is the entity that exports it where the recipient, or a party engaged by the recipient, physically navigates the aircraft or ship outside of Australia.

Paragraph 57 of the ruling provides that under item 3, the 60 day period commences the day after the recipient or another person at the recipient's request, takes physical possession of the aircraft or ship.

Paragraphs 58-59 of the ruling provide that a ship or aircraft is exported when it departs its final port or airport and leaves Australia for a destination outside Australia. Accordingly, the timing requirement is satisfied if the ship or aircraft departs its final Australian port or airport and leaves Australia before the end of the 60 day period.

Your director has confirmed that he will navigate the yacht out of Australia within 60 days of taking possession of the yacht. Therefore, under item 3 of subsection 38-185(1) of the GST Act, the supply of the yacht to you by the supplier was a GST-free supply.

Accordingly, when the supplier supplied the yacht to you, the supplier did not make a taxable supply under section 9-5 of the GST Act. Therefore, under section 11-5 of the GST Act, when you acquired the yacht, you did not make a creditable acquisition. Consequently, under section 11-20 of the GST Act, you are not entitled to claim any input tax credit on the acquisition of your yacht.