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Edited version of private advice
Authorisation Number: 1051674302327
Date of advice: 07 May 2020
Ruling
Subject: Goods and services tax and creditable acquisitions
Question
Are you entitled to input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for acquisitions in relation to the repair or replacement of assets affected by the 2019-2020 bushfires where the acquisitions are funded with money received under the Special Disaster Grant - Bushfires?
Answer
Yes, you will be entitled to input tax credits under section 11-20 of the GST Act for acquisitions in relation to the repair or replacement of assets affected by the 2019-2020 bushfires where the acquisitions are funded with money received under the Special Disaster Grant-Bushfires, provided these acquisitions meet the requirements of section 11-5 of the GST Act.
Section 11-20 of the GST Act provides that you are entitled to the input tax credit for any creditable acquisition that you make.
Section 11-5 of the GST Act states that you make a creditable acquisition if
(a) you acquire anything solely or partly for a * creditable purpose; and
(b) the supply of the thing to you is a * taxable supply; and
(c) you provide, or are liable to provide, * consideration for the supply; and
(d) you are * registered, or * required to be registered.
(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)
Section 11-15 of the GST Act provides that you acquire a thing for 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 the acquisition relates to making supplies that would be input taxed or the acquisition is of a private or domestic nature.
The ATO has published QC 21522, Dealing with Disasters and QC 21525, Disaster assistance payments, which deal with the 2019-2020 bushfires and other disaster events. In particular, QC21525 states the following in relation to disaster assistance payments:
If you use an assistance payment to purchase items for your business, the normal conditions for deductibility apply. The fact that money from a relief fund is used to purchase an item doesn't affect the deductibility of that item.
This ruling applies for the following period:
1 July 2019 to 30 June 2021
The scheme commences on:
1 July 2019
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You have received a $75,000 Special Disaster Grant - Bushfires non-assessable, non-exempt income amount from the NSW Rural Assistance Authority in the financial year ending 2020.
You will be using the money received from the grant to repair or replace business assets affected by the 2019-2020 bushfires including fences, water tanks, shed, farm equipment and fodder. Due to the shortage of materials and suppliers to replace assets, the acquisitions will be made over the 2020 and 2021 financial years.
The NSW Rural Assistance Authority website provides a link to the Special Disaster Grant - Bushfires Guidelines (the Guidelines). The Guidelines state as follows:
This assistance is provided through a joint Disaster Recovery Funding Arrangement between states and territories and the Commonwealth Government.
1. About the program
The objective of this assistance measure made under agreements between the Commonwealth and relevant State Governments under the Disaster Recovery Funding Arrangements, is to assist primary producers directly affected by the 2019-2020 bushfire disaster events (eligible events commencing August 2019), with costs associated with immediate recovery activities needed to rebuild their primary production enterprises.
The Emergency Bushfire Response in Primary Industries Grants provide a grant to primary producers to help pay for costs of clean-up and other emergency measures including disposing of dead stock, and rebuilding or replacing damaged or destroyed on-farm infrastructure.
The Australian Government has made the grant assistance received under this scheme non-assessable, non-exempt income.
...
8. Other matters
8.1 The Australian Government has made the grant assistance received under this scheme non-assessable, non- exempt income. Applicants do not pay tax on non-assessable, non-exempt income and do not include the amount when they work out their tax loss. Grant assistance received under this scheme is also not subject to GST.
...
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act
- Section 11-5
- Section 11-15
- Section 11-20