Edited version of your written advice

Authorisation Number: 1012790819051

Ruling

Subject: GST refund

Questions

Can XYZ claim back the GST that it paid on the acquisitions that it made in Australia from the Australian Taxation Office (ATO)?

Answer

XYZ can claim the GST that it paid on its business acquisitions that are considered to be creditable acquisitions from the ATO if it registers for GST.

Relevant facts and circumstances

XYZ is a non-resident.

XYZ is carrying on a specified enterprise.

XYZ does not have an ABN. XYZ is not registered for GST in Australia.

XYZ is not registered with ASIC, and it does not have a permanent establishment in Australia for income tax purposes. It does not carry on its business in Australia at a fixed and definite place of its own for a substantial period of time. Nor does it do so through an agent at a fixed and definite place for a substantial period of time.

XYZ enters into specified arrangements with Australian resident and non-resident businesses. XYZ performs parts of its services in Australia.

XYZ makes acquisitions in Australia that are in the course of its enterprise. XYZ provided copies of tax invoices from the Australian suppliers where GST was included in the price.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

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

A New Tax System (Goods and Services Tax) Act 1999 Section 11-15

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

A New Tax System (Goods and Services Tax) Act 1999 Section 23-5

A New Tax System (Goods and Services Tax) Act 1999 Section 23-10

Reasons for decision

Question 1 & 2

Reasoning

Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that an entity is entitled to the input tax credit for any creditable acquisition that it makes.

Section 11-5 of the GST Act provides that an entity makes a 'creditable acquisition' if all the following requirements are met:

(a) the entity acquires anything solely or partly for a creditable purpose

(b) the supply of the thing to the entity is a taxable supply

(c) the entity provides, or is liable to provide, consideration for the supply, and

(d) the entity is registered, or required to be registered for GST.

Paragraph 11-5(a)

Paragraph 11-5(a) provides that the acquisition must be for a 'creditable purpose'.

Section 11-15 of the GST Act explains the meaning of 'creditable purpose' and provides that an entity acquires a thing for a creditable purpose to the extent that it acquires it in carrying on its enterprise. However, the entity does not acquire the thing for a creditable purpose to the extent that:

• the acquisition relates to making supplies that would be input taxed, or

• the acquisition is of a private or domestic nature.

XYZ carries on an enterprise of transporting patients into and out of Australia. Hence, to the extent that the acquisitions are made in the course of XYZ's enterprise, the acquisitions are for a creditable purpose and therefore satisfy paragraph 11-5(a) of the GST Act.

Paragraph 11-5(b)

For a supply to be a taxable supply the supply must meet all the requirements of section 9-5 of the GST Act.

Section 9-5 of the GST Act provides that a supplier makes a taxable supply if all the following requirements are met:

(a) the supplier makes the supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that the supplier carries on

(c) the supply is connected with Australia, and

(d) the supplier is registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input Taxed.

In this case the suppliers have treated their supplies to XYZ as taxable supplies. If the supplies have correctly been treated as taxable supplies then the requirements of paragraph 9-5(b) of the GST Act is also satisfied.

Where a supplier treats a supply that was GST-free as a taxable supply the recipient must approach the supplier for a refund of the GST. This is because, under the GST legislation, the supplier is liable for the GST on the supply of the goods and services. As such, where the supplier has remitted the GST to the ATO on a supply that was GST-free, the ATO can only refund the GST to the supplier, once it is satisfied that the supplier has refunded the GST component to the purchaser.

Broadly, where the consumption of a thing supplied (goods, services, etc) takes place in Australia, even by a non-resident, GST law requires that GST is charged on the supply.

Paragraph 11-5(c)

XYZ satisfies paragraph 11-5(c) of the GST Act because XYZ paid and was liable to pay for the supplies.

Paragraph 11-5(d)

A non-resident is required to be registered for GST in Australia if the non-resident is carrying on an enterprise and their GST turnover from the sales that are connected with Australia meets or exceeds the registration turnover threshold of A$75,000 (or A$150,000, if the non-resident is a non-profit body).

Alternatively, if the non-resident entity is carrying on an enterprise but its turnover is below the registration turnover threshold, they may choose to register for GST in Australia.

We do not have sufficient information to determine if XYZ is required to be registered for GST. However, even if XYZ is not required to be registered for GST it may choose to register as it is carrying on an enterprise. If XYZ registers for GST and backdates its date of registration to when the creditable acquisitions were made, the requirement of paragraph 11-5(d) of the GST Act will be met.

Please note that input tax credits can only be claimed by registering for GST and lodging a business activity statement. As XYZ is not registered for GST it cannot obtain a refund from the ATO for the GST included in the price of the acquisitions that it made in Australia in the course of its enterprise.

For further information on GST please refer to the ATO website at www.ato.gov.au