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Ruling
Subject: GST and entitlement to input tax credits
Question
Are you entitled to the input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you make an acquisition for use in your business?
Answer
Yes, you are entitled to the input tax credit under section 11-20 of the GST Act when you make an acquisition for use in your business.
Relevant facts and circumstances
You are registered for GST and report your GST obligations quarterly.
You have advised that most of your income is derived from dividends however; you intend to purchase a machine and lease it to your associates at market rates.
Your associates will be registered for GST.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 11-20 and
A New Tax System (Goods and Services Tax) Act 1999 11-15.
A New Tax System (Goods and Services Tax) Act 1999 11-5.
Reasons for 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.
You make a creditable acquisition
o if you acquire anything solely or partly for a creditable purpose
o the supply of the thing to you is a taxable supply
o you provide, or are liable to provide, consideration for the supply and
o you are registered, or required to be registered, for GST.
In your case you have advised that you will provide consideration of approximately $475,000 and you are registered for GST. Therefore you will be making a creditable acquisition if you are acquiring the machine for a creditable purpose and the supply to you is a taxable supply.
The term creditable purpose is defined in section 11-15 of the GST Act to be where you acquire a thing to carry on your enterprise to the extent that you do not use it for making supplies that would be input taxed; or the acquisition is of a private or domestic nature.
In your case you have advised that you will be making supplies of leasing the machine which will not be input taxed supplies, and your acquisition of the machine will not be for a private or domestic nature.
Therefore, to the extent that the supply of the machine to you is a taxable supply made by the supplier and you use the machine for a creditable purpose you will be making a creditable acquisition and entitled to the associated input tax credits.