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Edited version of private advice
Authorisation Number: 1051583759658
Date of advice: 23 September 2019
Ruling
Subject: GST and entitlement to an input tax credit
Question
Are you entitled to claim an input tax credit on your purchase of a childcare business?
Answer
Yes. You are entitled to claim an input tax credit on your purchase of a childcare business because the acquisition is a creditable acquisition.
This ruling applies for the following period:
September 2019 to September 2023
Relevant facts and circumstances
You acquired a childcare business from an entity. The supply of the business is a taxable supply.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 11-5
Reasons for decision
Relevant legislation
Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity is entitled to an 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:
(a) it acquires anything sole or partly for a creditable purpose
(b) the supply of the thing to it is a taxable supply
(c) it provides, or is liable to provide, consideration for the supply, and
(d) it is registered, or required to be registered, for GST.
Section 11-15 of the GST Act provides that an entity acquires a thing for a creditable purpose to the extent that it acquires it in carrying on an enterprise. However, an acquisition is not 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.
Application of the law to your case
The supplies that a childcare business makes in carrying on its enterprise are not input taxed. As such, your acquisition of the childcare business is for a creditable purpose.
As the acquisition satisfies all of the requirements of section 11-5 of the GST Act, you are entitled to claim an input tax credit on the purchase of the childcare business.