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Edited version of private advice
Authorisation Number: 1052196602505
Date of advice: 27 November 2023
Ruling
Subject: Attribution of input tax credits on a lease
Question
How do you attribute the input tax credits for the GST paid on a leasing contract?
Answer
You attribute your input tax credits as 1/11th of each month's lease payment.
The scheme commenced on:
The date of issue of this private ruling.
Relevant facts and circumstances
You entered into a financing contract for an asset.
The asset is yours to operate & maintain, insure and pay stamp duty etc.
You provided a copy of the contract.
The following information was provided by the financier:
• The agreements are asset leases
• They are not a hire purchase arrangement
• Any arrangement for the lessee to purchase the asset at the expiry of (or during) the lease, is at a value negotiated outside the rent to own agreement.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 29-5
A New Tax System (Goods and Services Tax) Act 1999 section 29-10
A New Tax System (Goods and Services Tax) Act 1999 Division 156
Reasons for decision
If you account for GST on a basis other than cash, under Division 29 you attribute all the GST payable on a taxable supply to the earlier of the tax periods when:
• any of the consideration for the supply is received; or
• an invoice is issued for the supply
However, where you make a supply for a period or on a progressive basis and for consideration that is to be provided on a progressive or periodic basis, you attribute the GST payable as if each progressive or periodic component of the supply that you make were a separate supply. Subsection 156-5(1) requires you to attribute the GST payable on each notional separate supply in accordance with the basic attribution rules (subsection 29-5(1)).
Goods and Services Tax Ruling GSTR 2000/35 Goods and services tax: Division 156 - supplies and acquisitions made on a progressive or periodic basis (GSTR 2000/35) describes how to attribute goods and services tax (GST) and input tax credits with respect to supplies and acquisitions made for a period or on a progressive basis.
Division 156 applies where a taxable supply or creditable acquisition is made:
• for a period; or
• on a progressive basis
and, in either case, consideration is made:
• on a progressive basis; or
• on a periodic basis.
A supply or acquisition you make is on a progressive basis when the contract or agreement provides for stages of the supply during the course of the supply. A supply may also be a progressive supply where, under a contract, goods or services are to be supplied on an ongoing basis.
You provide consideration on a periodic basis when it is made in equal or unequal instalments provided upon expiration of specified periods. An example of consideration on a periodic basis is where payments are made monthly under an agreement to lease an asset.
If the supply or acquisition that you make is one to which Division 156 applies, then you attribute GST and input tax credits as if each component of the supply or acquisition were a separate supply or acquisition.
Your arrangement is an asset lease. GSTR 2000/35 addresses the treatment of leases as follows:
Leases
58. For GST purposes, a supply or acquisition by way of lease is treated as a periodic or progressive supply or acquisition to which Division 156 applies.
59. Division 156 has the effect of treating each periodic or progressive component of the lease as if it were a separate supply or acquisition which must then be accounted for in accordance with the attribution rules contained in sections 29-5 and 29-10.
60. Whether or not a particular lease document is an invoice for GST purposes, Division 156 may still apply, provided the other conditions are satisfied. This means that, when you enter into a lease and Division 156 applies, you do not attribute the GST payable or the input tax credits to which you are entitled for the entire period of the lease to the tax period in which you sign the lease agreement.
61. In the absence of an invoice, the GST payable or input tax credits relating to a specific component of a supply or acquisition by way of lease are attributed to the tax period in which the periodic or progressive payment for that particular component is provided or received. However, if a separate invoice for a particular component is issued prior to payment, then the GST or input tax credits in respect of that component are attributed to the tax period in which the invoice is issued.
Conclusion
You should claim input tax credits on your lease payments each month.