Edited version of private advice

Authorisation Number: 1052000054831

Date of advice: 30 June 2022

Ruling

Subject: GST and input tax credits

Question 1

Is the trust entitled to claim input tax credits?

Answer

Yes.

Question 2

To what extent is the trust entitled to claim input tax credits?

Answer

Th trust is entitled to claim the full amount of the GST paid on its purchases.

The scheme commences on:

The date of issue of this private ruling

Relevant facts and circumstances

The trust is registered for GST and accounts on a cash basis.

The trust was run by two directors of the trustee company.

The trust entered into a contract to build a complex on land owned by an associated entity.

The trust acquired the goods and services for a creditable purpose pursuant to s11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

The complex was constructed and invoiced to the trust via several instalment invoices from separate suppliers totalling $XXX including GST over the period April- Sept. All tax invoices are valid tax invoices.

Each of the invoices were paid by a single director, who loaned the funds to the trust, either himself personally or from a related entity.

The trust then sought finance in its own right for the GST exclusive price of the build and when the money was granted and paid to the trust, the money was used to repay this loan.

The relationship has since broken down and the director has now been removed as a director of the trustee company.

The remaining loan between the director and the trust is set to be dealt with in the family law settlement between the two individuals.

The director has declined to provide the trust with any confirmation in writing of the payments he made on behalf of the trust.

The GST on the invoices has not yet been claimed by the trust given that there is no evidence that they have provided consideration for the purchases.

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

Reasons for decision

Entities that are registered for GST are entitled to claim input tax credits for creditable acquisitions they make.

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.

The trust acquired the complex for a fully creditable purpose. The supplies made to the trust were taxable supplies and the trust was registered for GST.

The only issue to be addressed relates to the consideration for the supply.

Consideration is defined in s9-15 to include:

(a) any payment, or any act or forbearance, in connection with a supply of anything: and

(b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything

(2) It does not matter whether the payment, act or forbearance was voluntary, or whether it was by the recipient of the supply

Section 11-5(c) only requires that the trust was liable to provide the consideration.

Neither s9-15 of s11-5 requires that the consideration must be provided by the recipient of the supply, only that the recipient was liable to provide the consideration.

The facts clearly show that it was the trust that was liable to pay the consideration as evidenced by the tax invoices naming the trust as the recipient of the supply.

Additionally, the payments made to the suppliers by the director occurred when he was a director of the trustee company. The suppliers' invoices have been paid in full and the amounts paid were recognised in the financial accounts of the trust as a loan by the director to the trust.

Conclusion

The trust was liable to provide consideration for the supplies made and that consideration has been received by the suppliers. Therefore, the trust is entitled to claim the input tax credits.