Edited version of private advice

Authorisation Number: 1052357134251

Date of advice: 3 February 2025

Ruling

Subject: GST - depreciation for a commercial vehicle

Question 1

Are you entitled to a full GST credit of the GST paid on the acquisition of a Vehicle under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

Question 2

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

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commenced on:

22 August 20YY

Relevant facts and circumstances

You carry on a business. You are registered for GST.

You purchased a vehicle for an amount including GST.

You use the Vehicle for visiting sites that require 4-wheel drive access.

You use the Vehicle for work purposes only.

The gross vehicle mass, kerb weight and carrying capacity/payload have been provided.

The vehicle has 5 seats.

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 paragraph 25-1(2)(c)

Income Tax Assessment Act 1997 Division 40

Income Tax Assessment Act 1997 section 40-25

Income Tax Assessment Act 1997 section 40-230

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

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

Reasons for decision

Question 1

Summary

Yes, you are entitled to a full GST credit of the GST paid.

Detailed Reasoning

Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) you are entitled to GST credits 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.

In this case, you acquired the Vehicle to carry on your enterprise, the Vehicle was a taxable supply, you provided consideration and are registered for GST. You do not use the Vehicle for private or domestic purposes. Therefore, you have made a creditable acquisition as you satisfy the requirements of paragraphs 11-5(a), (b), (c) and (d) of the GST Act.

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 credits 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. Subsection 69-10(1) of the GST Act refers to a 'car' and the 'car limit' which are further discussed in sections 995-1 and 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997).

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. In this case, the Vehicle is designed to carry a load of less than 1 tonne and fewer than 9 passengers.

Subsection 40-230(1) of the ITAA 1997 states that the first element of the cost of a 'car designed mainly for carrying passengers' will be reduced to the car limit for the financial year in which you started to hold it if its cost exceeds that limit.

A vehicle that is not defined as a 'car designed mainly for carrying passengers' will not be subject to the 'car limit' under section 40-230 of the ITAA 1997.

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

Vehicle's that are listed as a dual cab, are assessed under the vehicle type of a crew cab according to Miscellaneous Taxation Ruling 2024 MT 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 two tonnes can be designed to carry both passengers and goods. Whether the principal purpose of a vehicle is designed to carry mainly passengers or goods depends on its load carrying capacity. 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 ADR at 4.5.2 state 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 68 kg is less than 50 percent of the difference between the 'Gross Vehicle Mass' and the 'Un-laden Mass'.

This calculation provides that a vehicle will be constructed for primarily carrying goods if the number of seats multiplied by 68kg is less than 50% 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 5 passengers, meaning the passenger carrying capacity is 340kg (5 passengers x 68kg). The passenger weight of 340kg is less than 50% of the payload of (number of kg), therefore, the Vehicle has a principal purpose of carrying goods.

Based on MT 2024, the Vehicle is a commercial Vehicle used for the principal purpose of carrying goods. Therefore, it is not a luxury car in accordance with subsection 25-1(2) of the LCT Act.

As the Vehicle is not a luxury car, subsection 69-10(4) of the GST Act excludes the application of subsection 69-10(1) of the GST Act to your GST credit claim on the purchase of the Vehicle. Accordingly, you are entitled to claim the full GST credit equal to the GST that you paid on the acquisition of the Vehicle.

Question 2

Is the Vehicle 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 ITAA 1997 will not apply.

Detailed reasoning

A deduction for the decline in value of depreciating assets is available under Division 40 of the Income Tax Assessment Act 1997 (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 68 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 have a vehicle with 5 seats. The Vehicle has a gross mass of (number of kg), a kerb weight of (number of kg), and a carrying capacity or payload of (number of kg). 5 seats multiplied by 68 kg is 340 kg. The carrying capacity or payload of 340 kg is less than half of the vehicle's carrying capacity of (number of kg). Therefore, it can be considered the Vehicle was not designed mainly to carry passengers. Therefore, the car limit in section 40-230 of the ITAA 1997 will not apply.