Edited version of your private ruling

Authorisation Number: 1012271097906

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Ruling

Subject: Claiming GST credits in relation to purchase of small technology certificates

Question 1

Are you entitled to claim goods and services tax (GST) credits for the purchase of Small-scale Technology Certificates (STC's) from a customer, when you on-sell the STC's, on the basis that they are second hand goods?

Answer

No, you are not entitled to a GST credit as you are purchasing the right to create a STC. This right is not second-hand goods.

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 are in the business of selling and installing small-scale solar electricity generation systems and you are a RET registered agent. As a consequence you purchase Small-scale Technology Certificates (STC's) from your customers who are neither registered for GST (in the majority of cases) nor are they RET registered agents.

You then sell the STC's on the open market at an agreed GST inclusive price.

You are seeking clarification as to whether you can treat the STC's as second-hand goods when you on-sell them. If so, this would then entitle you to claim a GST credit on the purchase from your customer.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999. Section 9-5, subsection 9-10(1), section 11-5 and Division 66 of the GST Act

Reasons for decision

In your request for a private binding ruling you contend that you are purchasing a small-scale technology certificate (STC) from your client (the supplier) and that such purchase represents the purchase of second-hand goods which will entitle you to a GST credit when you later on-sell those second hand goods on the open market.

We do not consider that what you are on-selling is either second-hand goods or goods to any extent nor is it the purchase of STC's.

The Renewable Energy (Electricity) Act 2000 (Commonwealth Consolidated Legislation) provides under subdivision BA - Small-scale technology certificates for small generation units, the following:

23C Who may create a certificate

(1) The owner of the small generation unit at the time that a right to create a certificate or certificates arises in relation to the small generation unit is entitled to create the certificate or certificates.

(2) However, the owner may, by written notice and in accordance with the regulations, assign the right to create the certificate or certificates to another person. If the owner does this, the owner is not entitled to create the certificate or certificates but the person to whom the right was assigned is entitled to create the certificate or certificates.

(3) Despite subsections (1) and (2), a person who is not registered may not create a certificate that relates to the small generation unit.

From our reading of the above, the owner of the right (your customer) has the right to create the STC. However, to do so they would be required to be registered with the relevant authority for that purpose. This is generally not the case and by arrangement with your customer they assign the right to you. When your customer assigns the right to create the STC to you, they are not supplying the STC itself, but the right to create the certificate. As you are a RET registered agent you are authorised to subsequently create the actual certificate (STC) yourself and sell it on the open market. As you are also registered for GST you will be making a taxable supply under section 9-5 of the GST Act.

Subsection 9-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides the meaning of supply as any form of supply whatsoever.

Subsection (2) without limiting subsection (1) provides that supply includes any of these:

· A supply of goods

· A supply of services

· A provision of advice or information

· A grant, assignment or surrender of real property

· A creation, grant, transfer, assignment or surrender of any right

· A financial supply

· An entry into, or release from, an obligation:

to do anything, or

to refrain from an act, or

to tolerate an act or situation.

Any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).

As outlined above a supply for GST purposes includes more than goods or services. Relevantly, the supply of a right, under paragraph (e) above, is not the supply of goods. It follows, that the eventual supply of the created certificate will also be the supply of a right.

The term 'second-hand goods' is not defined in the GST Act other than in section 195-1 where it states what is not included (that is, precious metals and some livestock). However, there is nothing to indicate that it is a term that has a special or trade meaning.

The definition of 'goods' in section 195-1 of the GST Act - means any form of tangible personal property.

The definition of 'tangible' as per The Macquarie dictionary (Electronic version 5.0.0 01/10/01) is:

tangible

adjective

1. capable of being touched; discernible by the touch; material or substantial.

2. real or actual, rather than imaginary or visionary.

3. definite; not vague or elusive: no tangible grounds for suspicion.

4. (of an asset) capable of being possessed or realised; having the form of real property or chattels.

As a 'right' is not goods as defined it therefore cannot, by extension, be treated as second-hand goods for GST purposes. Accordingly, you are not entitled to claim a GST credit by virtue of Division 66 (Second-hand goods) of the GST Act. You are also not making a creditable acquisition under section 11-5 of the GST Act as the supply to you is not a taxable supply. This is because the supplier (your customer) is not registered for GST.

In summary, you will not be entitled to a GST credit on your purchase of the right to create the STC where your client is not registered for GST. However, where your customer is registered, or required to registered for GST and the sale meets the requirements of section 9-5 of the GST Act then they would be making a taxable supply to you and you would be entitled to a GST credit.

Further information in relation to the assignment of the right, and the creation, of STC's can be found on our website at www.ato.gov.au. A copy of our fact sheet GST and the small-scale renewable energy scheme is attached for your convenience.