Edited version of private advice

Authorisation Number: 1051871044931

Date of advice: 20 July 2021

Ruling

Subject:GST and purchase of motor vehicle

Question

Are you entitled to a full input tax credit for the GST included in the price of the motor vehicle that you purchased?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You purchased a vehicle.

The purchase price of the vehicle was (amount) including (amount) GST.

The vehicle is a motor powered road vehicle. It is a 4 wheel drive ute. The vehicle carries a load of more than 1 tonne and 2 passengers (including the driver).

The vendor delivered or made available the vehicle in the indirect tax zone to you.

The vendor, who is registered for GST, sold the vehicle to you in the course or furtherance of its enterprise.

You purchased the vehicle solely to use in your farming business - using it on the farm and using it to take livestock to the market.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

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

A New Tax System (Goods and Services Tax) Act 1999 section 11-25

A New Tax System (Goods and Services Tax) Act 1999 section 69-10

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Income Tax Assessment Act 1997 section 995-1

A New Tax System (Luxury Car tax) Act 1999 section 9-5

A New Tax System (Luxury Car tax) Act 1999 subsection 25-1(2)

Reasons for decision

Summary

You are entitled to a full input tax credit for the GST included in the price of the motor vehicle because you made a creditable acquisition under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and it is not a car.

Detailed reasoning

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:

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.

(* denotes a term defined in section 195-1 of the GST Act)

Subsection 11-15(1) of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, pursuant to subsection 11-15(2) of the GST Act, 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 acquired the vehicle for a creditable purpose

You purchased the vehicle to use in carrying on your livestock farming business. No part of the acquisition relates to making input taxed supplies and you will not use the vehicle to any extent for private or domestic purposes. Accordingly, you acquired the vehicle solely for a creditable purpose. Therefore, the requirement of paragraph 11-5(a) of the GST Act is met.

The sale of the vehicle to you is a taxable supply

The sale of the vehicle to you is a taxable supply if the vendor meets all the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a)  you make the supply for *consideration; and

(b)  the supply is made in the course or furtherance of an

*enterprise that you *carry on; and

(c) the supply is connected with the indirect tax zone; and

(d) you are *registered, or*required to be registered.

However, the supply is not a *taxable supply to the extent that it is:

*GST-free or *input taxed.

The indirect tax zone includes mainland Australia, Tasmania and certain other areas.

All the requirements of section 9-5 of the GST Act are met. That is:

• the vendor sold the vehicle to you for consideration (the price)(paragraph 9-5(a)); and
• the vendor sold the vehicle in the course or furtherance of its enterprise (paragraph 9-5(b)); and
• the supply of the vehicle was connected with the indirect tax zone (paragraph 9-5(c)); and
• the vendor is registered for GST (paragraph 9-5(d)); and
• there are no provisions of the GST Act under which the sale of the vehicle to you is GST-free or input taxed.

Therefore, the sale of the vehicle to you is a taxable supply.

Paragraphs 11-5(c) and 11-5(d)

You provided consideration for the supply of the vehicle made to you. Therefore, you meet the requirement of paragraph 11-5(c) of the GST Act.

You are registered for GST. Therefore, you meet the requirement of paragraph 11-5(d) of the GST Act.

As you meet all of the requirements of section 11-5 of the GST Act, your purchase of the vehicle is a creditable acquisition. Therefore, you are entitled to an input tax credit for the purchase.

Amount of the input tax credit

Section 11-25 of the GST Act states:

The amount of the input tax credit for a *creditable acquisition is an amount equal to the GST payable on the supply of the thing acquired. However, the amount of the input tax credit is reduced if the acquisition is only partly creditable.

However, subsection 69-10(1) of the GST Act limits the amount of the input tax credits available for creditable acquisitions of certain cars.

Subsection 69-10(1) of the GST Act states:

If:

(a) you are entitled to an input tax credit for a *creditable acquisition or *creditable importation of a *car; and

(b) you are not, for the purposes of the A New Tax System (Luxury Car Tax) Act 1999, entitled to quote an *ABN in relation to the supply to which the creditable acquisition relates, or in relation to the importation, as the case requires; and

(c) 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 the input tax credit on the acquisition or importation is the amount of GST payable on the supply or importation of the car up to 1/11of that limit.

However, subsection 69-10(4) of the GST Act states:

This section does not apply in relation to:

(a)      the acquisition or importation of a *car that is not a *luxury car because of subsection 25-1(2) of

the A New Tax System (Luxury Car Tax) Act 1999; or

(b)      the acquisition of a car by lease or hire.

A 'car' is defined in section 195-1 of the GST Act to have the same meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

Section 995-1 of the ITAA 1997 provides that a 'car' means, a motor vehicle (except a motorcycle or similar vehicle) designed to carry a load of less than one tonne and fewer than nine passengers.

Section 995-1 of the ITAA 1997 provides that a motor vehicle means any motor-powered road vehicle (including a four wheel drive vehicle).

The vehicle sold to you by the vendor is a motor powered road vehicle; therefore, it is a motor vehicle.

We therefore need to determine whether the vehicle is a 'car' as defined above.

Although the vehicle that you purchased is designed to carry two passengers, the load carrying capacity of the vehicle is over 1 tonne. Therefore, the vehicle is not a car for income tax or GST purposes. Hence, the amount of your input tax credit is not limited to 1/11^th of the car limit.

Accordingly, you are entitled to the full input tax credit for the GST included in the price of the vehicle.