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Ruling

Subject: Input tax credits on acquisitions

Question 1

Can A claim an input tax credit on the acquisition made by B Overseas (BOS) from C where A acts as BOS' resident agent?

Answer

No.

Relevant facts and circumstances

C sold two pieces of equipment to BOS and invoiced for the sale. C later issued a further invoice to BOS for additional work carried out in Australia. Later again the refurbished equipment was exported. Some years later A became agent for GST purposes of BOS.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 57-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

Reasons for decision

Summary

A was not a party to the relevant transaction as required under Division 57 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Detailed reasoning

Under the basic rules for GST, the entity making the creditable acquisition is entitled to the input tax credits for that acquisition. However, if you are a resident and an agent under the general law for a non-resident principal who makes creditable acquisitions through you, then you are entitled to the input tax credit on the acquisitions and not the non-resident principal.

Of relevance is the term 'through a resident agent' that is stipulated in subsection 57-10(1) of the GST Act:

(1) If a *non-resident makes a *creditable acquisition or *creditable importation through a *resident agent:

(a) the agent is entitled to the input tax credit on the acquisition or importation; and

(b) the non-resident is not entitled to the input tax credit on the acquisition or importation.

The ATO's view is that transactions are made through you as an agent where you have the authority of the non-resident principal to make those transactions on its behalf.

Based on the information provided, BOS' acquisition of C's supply was not made through A as resident agent. A's appointment did not occur until well after the transaction was concluded. Therefore, any entitlement to an input tax credit is dealt with under the normal attribution laws rather than the special rules set out in Division 57 of the GST Act. As such, it is only the purchaser that may have an entitlement to an input tax credit.

Whilst it does not affect the decision above, the following is included for your consideration. Whether through a resident agent or acting alone, a non-resident's acquisitions do not attract an input tax credit entitlement unless the acquisitions meet the requirements of section 11-5 of the GST Act:

You make a creditable acquisition if:

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

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

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

(d) you are *registered, or *required to be registered.

Where the non-resident's acquisitions do not meet these requirements, the appointment of a resident agent is immaterial for GST purposes as there will be no underlying entitlement to input tax credits regardless.

Creditable acquisitions may be made by the non-resident principal if it is registered or required to be registered. If you are a resident agent, you will need to make reasonable enquiries to establish the non-resident's GST registration status or requirement to be registered.