Edited version of your private ruling

Authorisation Number: 1012443203885

Ruling

Subject: GST and Claiming Input Tax Credits after four-year time limit.

Question 1

Are you entitled to an input tax credit for the acquisition of a property that settled under the margin scheme and where the ATO subsequently determined that the supply of the property to you was a taxable supply not made under the margin scheme?

Answer

Based on the information provided, the Tax Office is not in a position to determine the entitlement to input tax credit for the acquisition of the property until the outcome of the appeal made by the vendor to the Administrative Appeal Tribunal (AAT) is known. Please refer to the reasons for decision.

Question 2

Will the Commissioner exercise his discretion to treat as a valid tax invoice the documents you provided in relation to the purchase of the property?

Answer

The Tax Office has to wait for the outcome of the appeal made by the vendor to the AAT before the Commissioner considers exercising his discretion to treat as a valid tax invoice the documents you provided in relation to the purchase of the above property.

This ruling applies for the following periods:

None

The scheme commences on:

Not applicable

Relevant facts and circumstances

· You are registered for GST and carry on an enterprise of property development.

· You acquired a land by way of a Memorandum of transfer for the purposes of development of units for sale.

· The settlement of the property took place on XX XX 20XX.

· The Commercial Contract specifies the purchase price inclusive of GST and stated the parties agreed that the vendor was entitled to apply the margin scheme at its absolute discretion.

· We are informed that as the Settlement Statement indicated the vendor had applied the margin scheme you did not claim an input tax credit for the acquisition.

· You did not intend to claim input tax credit as you wished to apply the margin scheme for the supply of the developed units to third party purchasers.

· Your solicitors informed that:

o their enquiries reveal that the Commissioner had conducted an audit on the vendor and taken the position that the vendor was not entitled to apply the margin scheme;

o the Tax Office has now treated the sale as a taxable supply and issued an assessment to the vendor for the 10% GST on the sale of the property.

o you do not appear to hold a valid tax invoice for the acquisition of the above property;

· The vendor did not provide you with a separate tax invoice when settlement of the property was completed on XX XX 20XX. Instead, it appears to have been intended that the Settlement Statement would operate as a tax invoice.

· In your application for a private ruling you mentioned that the Settlement Statement does not appear to be a valid tax invoice because it does not contain details of the GST payable on the supply or details to identify the supplier.

· Your solicitors wrote by email to the accountants acting for the vendor and made a formal request for a tax invoice specifying the correct amount of GST.

· The vendor's accountants responded that that the vendor was contesting the results of the ATO's audit and that their client is not presently in a position to issue a tax invoice.

· Your solicitors sent a further email to the accountants repeating their request, but to date no invoice has been received and it is considered unlikely that one will be issued.

· You believed that the margin scheme had been applied and applied correctly and therefore you did not claim input tax credits when you lodged your business activity statement for the month of XX 20XX.

· You also did not notify the ATO of your entitlement to input tax credits for the purchase of the property within the four year period ended YY December 20YY.

· On ZZ July 20ZZ, the Commissioner issued a private ruling to you stating that you were not entitled to apply the margin scheme without first confirming that the vendor was in fact eligible to apply the margin scheme for the sale of the property.

· The vendor's accountants advised your tax agent that the vendor was unsuccessful in objecting to the assessment made by the Tax Office and they have appealed to the Administrative Appeal Tribunal (AAT).

· Your tax agent has not been able to obtain any further details regarding the assessments issued to the vendor or the AAT proceedings from the vendor's accountants.

· You want to know if you are entitled to input tax credits for the acquisition of the property and are asking the Commissioner to exercise his discretion to treat as a valid tax invoice the Sales Contract and Annexures, Memorandum of Transfer or Settlement Statement (or some other document) in relation to the purchase of the above property.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 - section 11-20

Reasons for decision

Question 1

Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you are entitled to the input tax credit for any creditable acquisition that you make.

Section 11-5 of the GST Act provides that you make a creditable acquisition if you acquire anything solely or partly for a creditable purpose; and the supply of the thing to you is a taxable supply; and you provide, or are liable to provide consideration for the supply; and you are registered or required to be registered.

You have asked the Commissioner to exercise his discretion to allow you to use certain documents as a tax invoice and whether you are entitled to input tax credits in relation to your acquisition of the property.

You have also informed us that you believed that the supply made to you by the vendor was made under the margin scheme and that you have always intended to make your subsequent supplies to your recipients under the margin scheme. Therefore, the vendor did not issue a tax invoice and you have not claimed any input tax credits regarding your acquisition.

In this case we have been informed that the vendor was audited by the Tax office and the Office decided that the vendor was not eligible to apply the margin scheme to the sale of the property to you. We have also been told that the issue has been referred to the AAT.

Therefore, before the Tax office can decide on the GST status of your acquisition we need to wait for the AAT judgement.

Consequently, we cannot rule, at this point in time, about your entitlement to input tax credits.

Question 2

As the Tax Office cannot make a decision at this point in time in relation to the GST status of the property acquired by you it is considered that the Commissioner's discretion to treat the documents in your possession as a tax invoice is not required.

However, once the AAT decision is known you may apply for the Commissioner's discretion to treat the documents in your possession as a tax invoice.