Edited version of private advice

Authorisation Number: 1052347590461

Date of advice: 17 February 2025

Ruling

Subject: GST - input tax credits

Question

Is Entity X, the GST Group Representative Member, entitled to an input tax credit under section 48-45 of the A New Tax System (Goods and Services Tax Act) 1999 (GST Act), for the acquisition of assets (the Taxable Assets) by Entity A from Entity B under the Contract (Sale Agreement)?

Answer

Yes.

This ruling applies for the following period:

1 February 20YY to quarter ending 30 December 20YY

The scheme commenced on:

1 October 20YY

Relevant facts and circumstances

Entity X is a GST Group Representative Member of the GST group that includes Entity A.

Entity A entered into a contract with Entity B to acquire assets. The assets will be transferred by Entity B to Entity A at completion of the Contract. Entity A provides consideration for the assets.

The assets by Entity B consist of taxable supplies under section 9-5 of the GST Act (the Taxable Assets) and supplies that are input taxed under division 40 of the GST Act.

The Taxable Assets acquired by Entity A will be used by Entity A to make supplies to other entities (Customers) outside the GST Group. These supplies to Customers are not input taxed under division 40 of the GST Act.

Relevant legislative provisions

A New Tax System (Goods and Services Tax Act) 1999 section 48-45

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

Reasons for decision

Subdivision 48-B of the GST Act (sets out the consequences of approval of GST Groups and subsection 48-45 of the GST Act state the following:

48-45 Who is entitled to input tax credits

(1)          If an entity makes a *creditable acquisition or *creditable importation the input tax credit for which is attributable to a tax period during which the entity is a *member of a *GST group:

(a) the *representative member is entitled to the input tax credit on the acquisition or importation; and

(b) the entity making the acquisition or importation is not entitled to the input tax credit on the acquisition or importation (unless the entity is the representative member).

(2)          In deciding, for the purposes of subsection (1), whether an acquisition or importation by an entity is a *creditable acquisition or *creditable importation, the acquisition or importation is treated as being solely or partly for a *creditable purpose if, and only if, it would be so treated if:

(a)        the GST group were treated as a single entity; and

(b)        the GST group were not treated as a number of entities corresponding to the members of the GST group.

Section 11-5 of the GST Act sets out when an entity makes a creditable acquisition and 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.

The meaning of creditable purpose is set out in section 11-15 of the GST Act which states:

(1)          You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your * enterprise.

(2)          However, 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.

In this case Entity A is acquiring the Taxable Assets from Entity B. The acquisition of the Taxable Assets does not relate to Entity A making supplies that would be input taxed under paragraph 11-15(2)(a) of the GST Act. Rather the acquisition of the Taxable Assets relates to the taxable supply that Entity A makes to Customers on and from the completion date of the Contract. It follows that the acquisition of the Taxable Assets is made for a creditable purpose under paragraph 11-5(a). As the remaining requirements of section 11-5 are met the acquisition Entity A is making is a creditable acquisition.

However, as Entity A is a member of the GST Group, pursuant to section 48-45 of the GST Act, Entity X, as the representative member of the GST group which includes Entity A, is entitled to the input tax credit.