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Edited version of your written advice
Authorisation Number: 1013006931927
Date of advice: 4 May 2016
Ruling
Subject: GST and input tax credits
Question
Are you entitled to claim full input tax credits for your importation of goods where the private use of the goods by your employees constitutes a supply of fringe benefits?
Answer
Yes, you are entitled to claim full input tax credits for the importation of the goods where the private use of the goods by your employees constitutes a supply of fringe benefits.
However, you are liable to pay GST on your supply of the fringe benefits to the extent of the consideration payable by the employees in the form of recipients' contribution.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You are carrying on a business of buying and selling goods.
You imported goods recently. Your employees have a small portion of private use of the goods.
You claimed an input tax credit for the importation of the goods to the extent of your business use.
You are seeking a private ruling on whether the private use of the goods by the employees would constitute a supply of fringe benefits.
The employees will make contributions to cover the value of the fringe benefits.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 15-5
A New Tax System (Goods and Services Tax) Act 1999 section 15-10
Reasons for decision
You are entitled to an input tax credit for any creditable acquisition or creditable importation that you make. This includes creditable acquisitions and creditable importations made to supply fringe benefits.
Section 15-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act) states:
You make a creditable importation if:
(a) you import goods solely or partly for a *creditable purpose; and
(b) the importation is a *taxable importation; and
(c) you are *registered, or *required to be registered.
(* denotes a term defined under section 195-1 of the GST Act)
The importation of the goods is a taxable importation and you are registered for GST. The requirements in paragraphs 15-5(b) and15-5(c) of the GST Act are therefore satisfied. What remains to be determined is whether your importation of the goods was for a creditable purpose.
For the purpose of paragraph 15-5(a) of the GST Act, section 15-10 provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, you do not acquire the thing for a creditable purpose to the extent that:
(a) the acquisition relates to making supplies that would be input taxed; or
(b) the acquisition is of a private or domestic nature.
You are carrying on an enterprise of buying and selling goods. You imported the goods to be used in that enterprise; thus, the importation was for a creditable purpose.
As regards the private use of the goods by your employees, Goods and Services Tax Ruling GSTR 2001/3 addresses the issue of input tax credits in the context of provision of fringe benefits.
Paragraph 52 of GSTR 2001/3 states:
'52. An acquisition or importation you make to provide fringe benefit in respect of employment in your enterprise is made in carrying on the enterprise and is not of a private or domestic nature for the purposes of section 11-15 and section 15-10. It is your purpose at the time of making the acquisition or importation that is relevant to whether the acquisition or importation is for a creditable purpose. For example, an acquisition made to provide a car for the private use of your employee is made for a creditable purpose.'
Where the private use of the goods by your employees constitutes a supply of fringe benefits, the extent of such use is also for a creditable purpose. Accordingly, you are entitled to the full input tax credit for its importation of the goods.
Supply of fringe benefits
The provision of a fringe benefit can be a supply. The services of an employee can be consideration for the supply of a fringe benefit to that employee. Consideration for the supply of a fringe benefit may also take the form of a payment or contribution made by the recipient of the benefit.
Where you make a taxable supply of a fringe benefit, you are liable to pay GST to the extent of the consideration payable on the supply in the form of a recipient's payment or recipient's contribution.