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Edited version of your written advice
Authorisation Number: 1012769757599
Ruling
Subject: Input tax credits (ITC)
Question 1
Is the amount of input tax credits (ITC) on your acquisition of a caravan limited to 1/11 of the car limit?
Answer
No, the amount of ITC on your acquisition of a caravan is not limited to 1/11 of the car limit.
Relevant facts
You are registered for GST.
You are purchasing a new caravan.
You will tow the caravan to promote sponsored teams, the retail shop equipment and services provided.
You will also use the caravan to store and cartage equipment and tools for repairs and service whilst at competitions.
The caravan may be used 5% of the time for private purposes. The rest of the time (95%) the caravan will be used for business/enterprise purposes.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sections 11-20, 11-25, 69-10, 195-1.
Reasons for decision
Under section 69-10 of the GST Act if the price of a car exceeds the car limit, generally the maximum GST credit claimable is 1/11th of the car limit. The car limit for 2014-15 is $57466.
If an entity registered for GST makes a creditable acquisition of a car, section 69-10 applies to restrict GST input tax credits if it is a 'car' as defined and the value exceeds the car limit.
Section 195-1 of the GST Act gives 'car' the same meaning as section 995-1 of the ITAA 1997. A 'car' is defined as a 'motor vehicle (except a motor cycle or similar vehicle) that is designed to carry a load of less than 1 tonne and fewer than 9 passengers'. A 'motor vehicle' is further defined as a 'motor powered road vehicle (including a 4 wheel drive vehicle)'.
In this case you are purchasing a caravan that will be used to:
• cartage equipment and tools for repairs and services whilst at competitions;
• promote sponsored teams, the retail shop equipment and services provided.
The term 'caravan' is not described in the GST Act. Therefore, it takes its ordinary meaning.
The Macquarie Dictionary Online described the term 'caravan' as:
1. a vehicle in which people may live, whether temporarily or permanently, usually having two wheels and designed to be drawn by a car.
In this case the caravan will be towed to competitions. Therefore, it conforms to the description of 'caravan' above.
It follows that the caravan is not a car as defined for the purposes of the GST Act.
This means that full input tax credits is available in relation to a caravan acquired in the course or furtherance of an enterprise.
Partly creditable acquisition
Section 11-20 of the GST Act provides that you are entitled to ITC for any creditable acquisition that you make.
Section 11-25 of the GST Act stipulates that the amount of ITC for a creditable acquisition is an amount equal to the GST payable on the supply of the thing. However, the amount of ITC is reduced if the acquisition is only partly creditable.
An acquisition is partly creditable if it is used partly for a creditable purpose. You do not acquire the caravan for a creditable purpose to the extent you use it for private purposes.
Therefore, if your intention is to use the caravan 5% for private purposes you will need to apportion the ITC. This means that you can only claim as ITC 95% of the GST you paid on the supply of the caravan to you.