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Edited version of your private ruling
Authorisation Number: 1012440132289
Ruling
Subject: GST and sale of a car to veteran
Question 1
Can you make a GST-free supply of a car up to the car limit to an eligible veteran?
Answer
Yes.
Relevant facts and circumstances
An eligible veteran wishes to replace their current vehicle before reaching the 2 year/40,000 kilometre limit. The veteran's current vehicle is no longer suitable for them.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 38-505
Reasons for decision
Summary
An eligible veteran can purchase a car GST-free up to the car limit if they intend to use the car for personal transportation for a set time known as the 'Subdivision 38-P period':
· two years; or
· 40,000 kilometres.
Detailed reasoning
Section 38-505 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) allows for the GST-free supply of a car to an eligible veteran who intends to use the car for his/her personal transportation for a period known as the 'Subdivision 38-P period'. Subdivision 38-P period is defined in section 195-1 of the GST Act:
Subdivision 38-P period, in relation to the supply of a *car to an individual, means the period starting when he or she acquires it and ending at the earliest of the following times:
(a) the end of 2 years after the acquisition;
(b) the time when the car is no longer reasonably capable of being used for the purpose for which cars of that kind are ordinarily used;
(c) a time that the Commissioner considers to be appropriate in special circumstances.
In most cases this period is simplified to '2 years/40,000 kilometres', covering both paragraphs (a) and (b) above. Note that section 38-505 of the GST Act does not specify the eligible veteran must use the car for the entire period, but simply have the intention, at the time of purchase to use the car for the period.
If you have no reason to disbelieve that an eligible veteran is making a declaration of his/her intention to use the new car for the Subdivision 38-P period in good faith, you may sell a car GST-free up to the car limit.