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Edited version of private advice
Authorisation Number: 1051573271709
Date of advice: 31 October 2019
Ruling
Subject: Is the effective life of listed assets reasonable to be considered for the purposes of subparagraph 38-25(2)(b)(ii) of the GST Act?
Question
Does the Commissioner accepts the 'effective life' of the listed assets, which are used by you in your 'cost of supply' calculations, under subparagraph 38-250(2)(b)(ii) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the periods 1 July 2017 to 30 June 2022, are reasonable?
Answer
Yes, the Commissioner accepts the 'effective life' of the listed assets, which are used by you in your 'cost of supply' calculations, under subparagraph 38-250(2)(b)(ii) of the GST Act for the periods 1 July 2017 to 30 June 2022, are reasonable.
This ruling applies for the following periods:
1 July 2017 to 30 June 2022
The scheme commences on:
1 July 2017
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
(1) You are an endorsed as a Gift Deductible Recipient (DGR) and are registered for GST.
(2) You are seeking certainty from the Commissioner in relation to whether your methodology relating to your calculations of 'effective life' are reasonable
Assumptions:
· The listed assets are each depreciating assets for the purpose of Division 40 of the Income Tax Assessment Act 1997 ('ITAA 1997').
· You have not 'double counted' the amount of consideration used in your calculations in relation to the listed assets, to determine whether it can apply subparagraph 38-250 (2)(b)(ii) of the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act').
Reasons for decision
Summary
Based on the information provided, the Commissioner accepts the 'effective life' of the listed assets, which are used by you in your working out of your 'cost of supply' calculations under subparagraph 38-250(2)(b)(ii) of the GST Act for the periods 1 July 2017 to 30 June 2022, are reasonable.
Detailed reasoning
Effective Life and application to s38-250(2)(b)(ii) of the GST Act:
Subsection 38-250(2) of the GST Act provides for, amongst others, endorsed charities to provide GST-free supplies. Subparagraph 38-250(2)(b)(ii), that applies to supplies that are NOT accommodation, requires the supply to be less than 75% of the consideration the supplier provided, or was liable to provide, for acquiring the thing.
The Goods and Services Tax Determination GSTD 2013/4 discusses where capital assets that diminish in value over time are utilised in making a supply and whether the consideration provided by the supplier to acquire those assets can be taken into account in determining whether the supply is GST-free under subparagraph 38-250(2)(b)(ii) of the GST Act. Paragraphs 1 and 2 of GSTD 2013/4 states:
1. The consideration the supplier provided for acquiring those assets that diminish in value over time can be taken into account in determining whether a supply in that period is GST-free under subparagraph 38-250(2)(b)(ii) of the A New Tax System (Goods and Services Tax) Act 1999, to the extent the consideration provided reasonably relates to that supply.
2. To work out the amount of the consideration that can be taken into account, a supplier should apply any reasonable methodology that reflects the proportion of the consideration that relates to each supply made. Consideration for the acquisitions cannot be double-counted in determining whether subparagraph 38-250(2)(b)(ii) applies to the various supplies by the entity.
Application to your circumstances:
Based on the outcome of the market research undertaken, visitor expectation and consideration to maintaining world class standards, amongst other things, we consider that 'effective life' indicate by you in relation to the listed assets is reasonable.