Edited version of private advice

Authorisation Number: 1052218930571

Date of advice: 5 February 2024

Ruling

Subject: GST and claiming input tax credits

Question 1

Is the company able to claim an input tax credit under s11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in relation to the purchase of the property?

Answer

No.

Question 2

If the answer to question 1 is yes, will the Commissioner exercise his discretion to allow the company to treat the contract of sale of land as a tax invoice under s29-70(1A) of the GST Act?

Answer

No.

The scheme commences on:

DD February 20YY

Relevant facts and circumstances

You entered into a Contract of Sale of Land (contract) for the property.

The purchase price for the property was $XXX.

The property is a commercial property comprising retail and industrial warehousing. It does not consist of any residential component.

Settlement was delayed until 20XX.

The property was sold as a going concern in accordance with the contract.

Two units were subject to a verbal month-to-month lease.

The remainder of the property was vacant on the settlement date.

A clause of the contract states:

'The purchaser must pay to the vendor any GST payable by the vendor in respect of a taxable supply made under the contract in addition to the price if:

[...]

(d) the particulars of the sale specify that the supply made under this contract is of a going concern and the supply (or part of it) does not satisfy the requirements of section 38-325 of the GST Act.'

You have requested a tax invoice from the vendors for the purchase of the property and they have refused to provide one.

Relevant legislative provisions

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

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

A New Tax System (Goods and Services Tax) Act 1999 section 29-70(1A)

A New Tax System (Goods and Services Tax) Act 1999 section 38-325

Reasons for decision

You are only entitled to an input tax credit to the extent that the supply to you was a taxable supply (s11-5(b)) of the GST Act.

Your contract evidences that the property was supplied as a going concern. You state that the one lease in place at the time of settlement only covered a floor area of approximately XX% of the total floor space and that no other part of the property was being actively marketed.

The Commissioner is not in a position to provide a private ruling relating to facts that pertain to another party (i.e., the vendor). Such a dispute is a contractual issue between the parties.

Additionally, regard needs to be had to the wording in a clause of the contract. The clause clearly states that, to the extent that any part of the supply of the property is taxable because it is not a supply of a going concern, the purchaser (you) would need to pay the GST in addition to the price.

Such a clause is known as a gross-up clause and means that you would be required to pay an additional amount of consideration under the contract to cover any GST payable by the vendor. Only then would you be able to claim input tax credits.

As such, there is no need to consider the Commissioner's discretion in relation to treating the contract as a tax invoice.