Edited version of private ruling

Authorisation Number: 1011769065760

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Ruling

Subject: Creditable acquisitions

Are you entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the acquisition of a vacant block of land?

Answer

No, you are not entitled to an input tax credit because you did not make a creditable acquisition when you acquired the land.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are registered for GST.

You purchased a vacant block of land under a contract entered into in September 20XX.

You have applied for a private ruling as to whether you can claim a GST input tax credit on the purchase.

Your application for a ruling provided:

· three pages of the standard contract, which identifies the sellers and you as the buyer of land.

· a one page facsimile from the vendor's Solicitors to your Solicitors requesting your agreement to amend the contract to include a GST margin scheme clause in the special condition to the contract.

· a one page document entitled 'settlement statement' which describes the land which was settled in November 20XX with an increasing adjustment for government charges.

The contract states - 'Unless otherwise specified in this contract, the Purchase Price includes any GST payable on the supply of the property to the buyer.'

The faxed request to apply the GST margin scheme was denied by you.

The acquisition of the vacant block of land was for purposes of development.

Your search of the web site 'abr.gov.au' did not indicate that the vendors were registered for GST. You state that their request to amend the contract to include application of the margin scheme just prior to settlement indicates that they would be required to be registered for GST.

The vendors are not registered for GST.

You have requested a tax invoice in relation to the supply of the land.

The vendors have not provided a tax invoice.

Reasons for decision

Summary

No; you are not entitled to an input tax credit under section 11-20 of the GST Act in relation to your acquisition of a vacant block of land because you did not make a creditable acquisition.

Detailed reasoning

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

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

(e) you acquire anything solely or partly for a creditable purpose; and

(f) the supply of the thing to you is a taxable supply; and

(g) you provide, or are liable to provide, consideration for the supply; and

(h) you are registered, or required to be registered.

To be entitled to claim an input tax credit all of the above requirements must be satisfied. In addition, under subsection 29-10(3) of the GST Act, you must also hold a tax invoice for the creditable acquisition when you claim the input tax credit (or any part of the input tax credit) on the acquisition.

The supplier of a taxable supply must, under subsection 29-70(2) of the GST Act, give to the recipient a tax invoice for the supply within 28 days of the recipient of the supply requesting it.

Goods and Services Tax Ruling GSTR 2000/28 GST: attributing GST payable or an input tax credit arising from a sale of land under a standard land contract explains when you may account for input tax credits on the sale of land under a standard land contract.

Goods and Services Tax Ruling GSTR 2006/4 GST: determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose, explains the Commissioner's view on the meaning of 'creditable purpose' in Division 11 of the GST Act.

Acquisition

Section 11-10 of the GST Act gives the meaning of acquisition and provides that an acquisition is any form of acquisition whatsoever, including an acceptance of a grant, assignment or surrender of real property (see paragraph 11-10(2)(d) of the GST Act). The acquisition of the vacant land is an acquisition for GST purposes.

Creditable purpose

Section 11-15 of the GST Act gives the meaning of creditable purpose and provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, you do not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed.

You have stated that you acquired the land for the purpose of development. In the circumstances, it is unlikely that you would make a supply of the land that would be input taxed under Division 40 of the GST Act.

We accept you acquired the land for a creditable purpose in carrying on your enterprise of property development.

Taxable supply

Taxable supply has the meaning given by sections 9-5 (the basic rules) of the GST Act. A thing is a taxable supply to you if the supply by the vendor satisfies the requirements of section 9-5 of the GST Act. The requirements include, at paragraph 9-5(d) of the GST Act that the vendor is registered or required to be registered for GST.

On the basis of the information available, the vendors are not registered for GST.

We are unable to accept your argument that the vendor's request to amend the contract to include application of the margin scheme indicates that they would be required to be registered for GST. On the facts presented, there is no evidence to suggest the vendors would be required to be registered for GST. Where the vendor is not registered, nor required to be registered, for GST, the supply will not satisfy the requirements for a taxable supply under paragraph 9-5(d) of the GST Act.

Generally, the provision of a tax invoice is prima facie evidence that a supply was a taxable supply and will clearly identify the supplier. The absence of a tax invoice is an indication that the supply was not a taxable supply. If the supply to you was a taxable supply, your supplier must provide you with a tax invoice within 28 days after you request one. In the absence of a valid tax invoice we do not accept that the supply to you was a taxable supply.

Consideration

You provided consideration for the supply at settlement.

Registration

You are registered or required to be registered for GST.

Conclusion

Because you do not satisfy the requirement of paragraph 11-5(b) of the GST Act, you are not entitled to an input tax credit for the acquisition of vacant land under section 11-20 of the GST Act.

In addition, in the absence of a tax invoice, you are not entitled to claim an input tax credit in any tax period.

Further issues for you to consider

Because the supply of the land to you was not a taxable supply, you may be eligible to apply Division 75 of the GST Act - the margin scheme when you, in turn, supply the land. Under the margin scheme, GST is payable on the margin for the supply and takes into account the consideration for your acquisition of the interest being supplied.