Edited version of your private ruling

Authorisation Number: 1012601526505

Ruling

Subject: GST and claiming input tax credits (GST credits)

Question

Are you entitled to claim GST credits on goods and services that are purchased with the funds you receive as a result of an agreement you have with another non related entity?

Answer

Yes, but not on services provided to people (your beneficiaries) where it is the beneficiary that has contracted with the supplier. This would include utilities such as power, water, telephone or similar.

Relevant facts and circumstances

• You are registered for goods and services tax (GST).

• You are an endorsed charity.

• Your purpose it to relieve the poverty, misfortune and other hardships of your beneficiaries.

• A beneficiary requiring assistance can apply to you using an 'application for help' form.

• The assistance to a beneficiary can take the form of goods and services, flights, accommodation and the payment of utilities (such as power, water or telephone).

• You do not provide assistance in the form of monetary payments to your beneficiaries.

• In the case of goods and services, you arrange with the supplier via a purchase order for them to supply the beneficiary with the goods or services they require. The purchase order gives permission for the suppler to charge your credit card and requests that a tax invoice be faxed to you.

• Goods are provided to a beneficiary once the beneficiary identifies themselves to the supplier and the supplier will deliver the goods to the beneficiary's home if required.

• Sometimes a tax invoice appears in the name of the beneficiary and not your name.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Subsection 38-475(2)

Section 38-480

Section 40-65

Section 195-1.

Tax Administration Act

Subsection 105-55(1) of Schedule 1.

Reasons for decision

When a charity pays a bill on behalf of a person in need, the charity is paying the account as a 'third party' and is not making an acquisition of anything. This would include bills for electricity, water, telephone or similar. As the supply is made to the person and not to the charity, the charity is not entitled to any GST credits in these circumstances.

Similarly, a charity is not entitled to GST credits where it purchases a voucher (with a stated money value) from a retailer and gives the voucher to someone for them to purchase goods or services. GST is not payable when the voucher is purchased and any taxable supply of goods or services on redemption of the voucher is made to the person using the voucher and not to the charity.

The case is different if a charity has an agreement with a retailer that requires the retailer to provide certain individuals with goods or services upon presentation by the individuals to the retailer of an appropriate authority from the charity. After provision of the goods (or services) to the individuals, the retailer sends the authority and the tax invoice to the charity for payment. Under the agreement the supply of the goods (or services) is made to the charity even though the agreement requires the goods (or services) to be provided to the individuals. As the charity makes an acquisition of the goods (or services) it will be entitled to a GST credit for any GST payable on those goods (or services).

In your case, you arrange with a retailer via a purchase order for them to supply a beneficiary with the goods or services they require. The purchase order gives permission for the retailer to charge your credit card and requests that a tax invoice be faxed to you. Goods are then provided to the beneficiary once the beneficiary identifies themselves to the retailer and the retailer will deliver the goods to the beneficiary's home if required. Given this, we consider that you have an agreement with the retailer that indicates it is you that is acquiring the goods or services and consequently, you are entitled to claim the GST included in the price of these goods or services.

Tax invoices

A tax invoice is required from the retailer on goods or services purchased having a value exceeding $82.50 (GST inclusive) before you can claim a GST credit. In the case of goods or services purchased using an online purchasing system (such as in the case of airline flights or possibly hotel bookings), as discussed, you are entitled to apply the procedures given by the document A New Tax System (Goods and Services Tax) Waiver of Tax Invoice Requirement (Acquisitions by Recipients Using Electronic Purchasing Systems) Legislative Instrument 2013 - WTI2013/3 and treat the documentation received from the online purchasing system as a tax invoice.

Where a tax invoice is in the name of the beneficiary and not yours, you may also apply section

29-70(1A) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). This section provides that you can treat a document issued by the retailer as a tax invoice provided

• the document would comply with the information requirements of a tax invoice but for the fact that it does not contain certain information, and

• all of that information can be clearly ascertained from other documents given by the retailer to you.

In all other cases where you don't have a tax invoice, you are entitled to write to the Commissioner of Taxation (Commissioner) and ask him to use his discretion to allow a document (or documents) to be treated as if they were tax invoices.

Four year rule

Subsection 105-55(1) of Schedule 1 to the Tax Administration Act (TAA) provides a statutory time limit on refunds and other payments or credits from the Commissioner and states:

You are not entitled to a refund, other payment or credit to which this subsection applies in respect of a *tax period or importation unless:

(a) within 4 years after:

(i) the end of the tax period; or

(ii) the importation,

as the case requires, you notify the Commissioner (in a *GST return or otherwise) that you are entitled to the refund, other payment or credit …

Given this, unless you have notified the Commissioner of your entitlement for the purposes of paragraph 105-55(1)(a) of Schedule 1 to the TAA within 4 years after the end of the December 2009 tax period, you will cease to be entitled to any GST credits for those tax periods prior to this period.