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Edited version of private advice
Authorisation Number: 1051898259470
Date of advice: 16 September 2021
Ruling
Subject: Goods and services tax
Question
Are you making a creditable acquisition under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you acquire the Services from the Service Provider?
Answer
No.
Relevant facts and circumstances
You are an entity and you are registered for the goods and services tax (GST).
You have entered into a written agreement (Contract) with another entity (Service Provider) for the acquisition of Services.
The Service Provider must provide the Services to you in accordance with the terms of the Contract.
You are required to pay the agreed amount to the Service Provider for the Services.
The supply of the Services by the Service Provider to you is a GST-free supply under the GST legislation.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5
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
A New Tax System (Goods and Services Tax) Act 1999 Section 195-1
Reasons for decision
Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that an entity is entitled to the input tax credit for any creditable acquisition that it makes.
Section 11-5 of the GST Act lists the requirements that must be satisfied for an entity to make a creditable acquisition. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if:
(a) it acquires anything solely or partly for a creditable purpose;
(b) the supply 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.
All the above requirements (a) to (d) under section 11-5 of the GST Act must be met for the acquisition to be a creditable acquisition.
An entity makes a taxable supply under section 9-5 of the GST Act if all the following requirements are met:
• it makes the supply for consideration;
• the supply is made in the course or furtherance of an enterprise that it carries on;
• the supply is connected with the indirect tax zone (that is, Australia);
• the entity is registered or required to be registered for GST; and
• the supply is neither GST-free nor input taxed.
A supply is not a taxable supply where it is GST-free. In this case, the Services that you acquired from the Service Provider was a GST-free supply to you. Therefore, the supply of the Services to you is not a taxable supply to you. The requirement (b) under section 11-5 of the GST Act is not met. As all the requirements of section 11-5 of the GST Act will not be met, your acquisition of the Services will not be a creditable acquisition.