Edited version of private advice

Authorisation Number: 1051769970439

Date of advice: 6 November 2020

Ruling

Subject: Instant asset write off and car limit

Question 1

Is the vehicle exempt from the car limit under section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. The vehicle is exempt from the car limit under section 40-230 of the ITAA 1997 as it is not a car designed mainly for carrying passengers as required under subsection 40-230(1) of the ITAA 1997.

Question 2

Are you entitled to a full GST credit of the GST paid on the acquisition of the vehicle made on XXXX 2020 under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, you are entitled to a full GST credit of the GST paid on the acquisition of the vehicle made on XXXX 2020 under section 11-20 of the GST Act as the acquisition is a creditable acquisition under section 11-5 of the GST Act.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The trustee for the Trust(you) is an Australian entity and is registered for GST.

The trustee purchased a new Crew Cab ute in 20XX.

The trustee took possession of the vehicle and commenced using it 100% for business purposes before 30 June 20XX.

The vehicle can carry five passengers (including the driver).

This vehicle is marketed in Australia as a commercial vehicle.

The full purchase price of the vehicle was $XX,XXX. Included in this purchase price is GST of $X,XXX and was paid before 30 June 20XX. No luxury car tax was included on the invoice.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 40-230

Income Tax Assessment Act 1997 subsection 40-230(1)

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

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

Reasons for decisions

Under section 11-20 of the GST Act you are entitled to GST credit for any creditable acquisition that you make.

Section 11-5 of the GST Act provides that you make a creditable acquisition if:

a)    you acquire anything solely or partly for a creditable purpose

b)    the supply of the thing to you is a taxable supply

c)     you provide, or are liable to provide, consideration for the supply and

d)    you are registered or required to be registered for GST.

Under subsection 11-15(1) of the GST Act you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

However, under subsection 11-15(2) of the GST Act 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.

Based on the information provided, you satisfy paragraphs 11-5(a) to 1-5(d) of the GST Act as follows:

a)    you have purchased the vehicle to carry on your enterprise and the vehicle is used solely for business purposes (100% business use). The vehicle is not used for private and domestic purposes and you do not use the vehicle to make any input taxed supplies. Therefore, you have acquired the vehicle for a creditable purpose; and

b)    the supply of the vehicle to you is a taxable supply, and

c)    you have paid for the vehicle including; and

d)    you are registered for GST.

Therefore, you have made a creditable acquisition under section 11-5 of the GST Act when you acquired the vehicle for your business. You are entitled to claim the GST credits on the vehicle.

The amount of GST credit for a creditable acquisition is equal to the GST payable on the supply of thing acquired unless:

1.    the acquisition is partly creditable; in which case, the GST credit is worked out based on the extent of the creditable purpose; or

2.    subsection 69-10(1) of the GST Act applies

Subsection 69-10(1) of the GST Act limits the amount of GST credit for a creditable acquisition or creditable importation of a car. Where the GST inclusive market value of the car exceeds the car limit for the financial year in which you first used the car for any purpose, the amount of GST credit is 1/11^th of that limit.

For the purpose of subsection 69-10(1) of the GST Act, a 'car' refers to a car as defined in the ITAA 1997. As discussed in our response to Question 1, the vehicle does not fit the definition of a car in the ITAA 1997 and is not subject to the car limit under section 40-230 of the ITAA 1997. Therefore, subsection 69-10(1) of the GST Act does not apply.

Accordingly, you are entitled to claim full GST credit equal to the GST that you have paid on the acquisition of the vehicle on XX XXXX 20XX.