Edited version of private advice

Authorisation Number: 1052350413411

Date of advice: 06 February 2025

Ruling

Subject: GST credit

Question 1

Are you entitled to claim the full GST credit on the acquisition of the Vehicle under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Answer 1

Yes, you are entitled to claim the full GST credit on the acquisition of the Vehicle under section 11-20 of the GST Act as the acquisition would be a creditable acquisition under 11-5 of the GST Act.

Question 2

Is the Vehicleexempt from the car limit for depreciation purposes under section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 2

Yes.

This ruling applies for the following period:

1 July 20XX to 06 February 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

•                     You are carrying on an enterprise and registered for goods and services tax (GST).

•                     The Vehicle is not yet purchased.

•                     The Vehicle will be used for towing.

•                     You will use this Vehicle for work purposes only.

•                     The Vehicle has the following specifications:

o        The payload/carrying capacity for this vehicle is XXkg (gross vehicle Mass XXkg, Kerb weight XXkg)

o        The seating capacity for this vehicle is X people.

o        The towing capacity for this vehicle is Xkg.

Relevant legislative provisions

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 subsection 69-10(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 69-10(4)

A New Tax System (Luxury Car Tax) Act 1999 subsection 25-1(2)(c)

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1997 (ITAA 1997) Division 40

Income Tax Assessment Act 1997 (ITAA 1997) section 40-25

Income Tax Assessment Act 1997 section 40-230

Income Tax Assessment Act 1997 (ITAA 1997) subsection 40-230(1)

Income Tax Assessment Act 1997 (ITAA 1997) subsection 40-230(3)

Vehicle Standard (Australian Design Rule - Definitions and Vehicle Categories) 2005 rule 4.5.2

Reasons for decision

Question 1

Are you entitled to claim the full GST credit on the acquisition of the Vehicle under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Summary

You are entitled to claim the full GST credit on the acquisition of the Vehicle under section 11-20 of the GST Act as the acquisition would be a creditable acquisition under section 11-5 of the GST Act.

Detailed reasoning

Under section 11-20 of the GST Act you are entitled to GST credit for any creditable acquisition that you make.

Section 11-5 of the GST Act provides that you make a creditable acquisition if:

(a)          you acquire anything solely or partly for a creditable purpose,

(b)          the supply of the thing to you is a taxable supply,

(c)           you provide, or are liable to provide, consideration for the supply, and

(d)          you are registered or required to be registered for GST.

Under subsection 11-15(1) of the GST Act you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

However, under subsection 11-15(2) of the GST Act you do not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed or the acquisition is of a private or domestic nature.

Based on the information provided, you satisfy paragraphs 11-5(a) to (d) of the GST Act as follows:

(a)          you will purchase the Vehicle to carry on your enterprise and the Vehicle is used primarily for business purposes and you do not use the vehicle to make any input taxed supplies. Therefore, you will acquire the Vehicle for a creditable purpose, and

(b)          the supply of the Vehicle to you will be taxable supply, and

(c)           you will provide consideration for the Vehicle, and

(d)          you are registered for GST.

Therefore, you made a creditable acquisition under section 11-5 of the GST Act when you acquired the Vehicle for your business. You are therefore entitled to claim GST credits on the Vehicle.

The amount of GST credit for a creditable acquisition is equal to the GST payable on the supply of thing acquired unless:

1.            the acquisition is partly creditable; in which case, the GST credit is worked out based on the extent of the creditable purpose, or

2.            subsection 69-10(1) of the GST Act applies.

Subsection 69-10(1) of the GST Act limits the amount of GST credit for a creditable acquisition or creditable importation of a 'car'. Where the GST inclusive market value of the 'car' exceeds the 'car limit' for the financial year in which you first used the car for any purpose, the amount of GST credit is 1/11th of that limit.

For the purpose of subsection 69-10(1) of the GST Act, a 'car' and the 'car limit' refers to the Income Tax Assessment Act 1997 (ITAA 1997) sections 995-1 and 40-230 respectively.

Section 995-1 of the ITAA 1997 defines a 'car' as a motor vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers.

The Vehicle is designed to carry a load of less than 1 tonne and fewer than 9 passengers.

Subsection 40-230(3) of the ITAA 1997 states the 'car limit' is indexed each year. For the 2024/25 financial year, the car limit is $69,674.

The Vehicle you will purchase for an amount exceeding the 'car limit' during the 2024/25 financial year.

Subsection 69-10(1) applies unless it is excluded by subsection 69-10(4) of the GST Act.

Subsection 69-10(4) provides subsection 69-10(1) does not apply to a vehicle that is not a luxury car under subsection 25-1(2) of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act).

Paragraph 25-1(2)(c) of the LCT Act provides that a car is not a luxury car if it is a commercial vehicle that is not designed for the principal purposes of carrying passengers.

The term 'commercial vehicle' is not defined in the LCT Act and therefore, the ordinary meaning of the words applies. The Macquarie Dictionary online, www.macquariedictionary.com.au viewed 14^th January 20XX, gives the following meaning to the term 'commercial vehicle':

a vehicle able to carry goods or passengers, and designated for use by businesses, as a panel van, utility, etc.

Vehicles that are listed as a crew cab, as the Vehicle is described, are assessed under the vehicle type of a dual cab as per Miscellaneous Taxation Ruling 2024 Fringe benefits tax: dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel (MT 2024). Crew cab vehicles with a load carrying capacity of less than one tonne can be designed to carry both passengers and goods. The principal purpose of these vehicles depends on its load carrying capacity and whether it is designed to carry mainly passengers or goods. MT 2024 provides a calculation that can be used to determine the principal purpose for which a crew cab has been designed.

MT 2024 details the method used to determine whether the principal purpose of a vehicle is for carrying passengers and states the following at paragraph 14:

...It is considered that the appropriate basis for determining this issue is whether or not the majority of the designed load capacity is attributable to passenger carrying capacity. This approach is consistent with that adopted under the Australian Design Rules (ADR) in determining what is a passenger vehicle.

The Vehicle Standard (Australian Design Rule - Definitions and Vehicle Categories) 2005 (the ADR) at rule 4.5.2 states that:

A vehicle constructed for both the carriage of persons and the carriage of goods shall be considered to be primarily for the carriage of goods if the number of seating positions times 68kg is less than 50 percent of the difference between the 'Gross Vehicle Mass' and the 'Unladen Mass'.

This calculation provides that a vehicle will be considered to be constructed for primarily carrying goods if the number of seats multiplied by Xkg is less than X% of the difference between the GVM and the unladen mass (i.e. the payload).

In this case, based on the information provided, the Vehicle can carry X passengers, meaning the passenger carrying capacity is Xkg (X passengers x Xkg). Therefore, as the passenger weight of Xkg is less than X% of the payload of Xkg, the Vehicle has a principal purpose of carrying goods.

Taking into account the calculation utilised from MT 2024, the Vehicle is considered a commercial vehicle that is not designed for the principal purpose of carrying passengers, instead the Vehicle is a commercial vehicle used for the principal purpose of carrying goods used for business or trade.

Therefore, as the Vehicle is not a luxury car in accordance with subsection 25-1(2) of the LCT Act, subsection 69-10(4) of the GST Act excludes the application of subsection 69-10(1) to your GST credits claim on the purchase of the Vehicle. Accordingly, you are entitled to claim the full GST credit equal to the GST that you will pay on the acquisition of the Vehicle.

Question 2

Is theVehicle exempt from the car limit for depreciation purposes under section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Summary

As the Vehicle is not designed to mainly carry passengers the car limit in section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997) will not apply.

Detailed reasoning

A deduction for the decline in value of depreciating assets is available under Division 40 of the ITAA 1997. Specifically, a deduction is available for the decline in value of a depreciating asset that is held by you to produce assessable income under section 40-25 of the ITAA 1997.Subsection 40-230(1) limits the deduction for the depreciation of the vehicle to the car limit defined in subsection 40-230(3) of the ITAA 1997 if a vehicle is designed mainly to carry passengers.

Some vehicles are designed to carry both goods and passengers. The Australian Design Rules outline how to determine what a vehicle was designed to carry. Under section 4.5.2 of the Vehicle Standard Australian Design Rule (ADR 2005) a vehicle designed to carry both goods and passengers is considered a goods vehicle if the number of seats multiplied by X Kg is less than half of the carrying capacity or payload of the vehicle, otherwise it will be considered a vehicle designed mainly to carry passengers.

You plan to buy a Vehicle with X seats. The Vehicle has a gross mass of X kg, a kerb weight of X kg, and a carrying capacity or payload of X kg. X seats multiplied by X kg is X kg. The carrying capacity or payload of X kg is less than half of the vehicle's carrying capacity of X kg. Therefore, it can be considered your Vehicle was not designed to mainly to carry passengers. Therefore, the car limit in section 40-230 of the ITAA 1997 will not apply.