Edited version of private advice

Authorisation Number: 1052387138918

Date of advice: 12 May 2025

Ruling

Subject: GST - input tax credits

Question 1

Is Entity A entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) relating to the supply of goods and/or services under a Supply Contract between Entity B and a Supplier when Entity A enters into:

a)            an Agreement to pay (ATP) with Entity B, and

b)            an Assumption Agreement (AA) with Entity B and its Supplier in respect of the Supply Contract?

Answer 1

No. Entity A is not entitled to an input tax credit under section 11-20 of the GST Act relating to the supply of goods and/or services under a Supply Contract between the Entity B and a Supplier when Entity A enters into:

a)            an ATP with Entity B, and

b)            an AA with Entity B and its Supplier in respect of the Supply Contract.

Question 2

Is Entity B entitled to an input tax credit under section 11-20 of the GST Act relating to the supplyof goods and/or services under a Supply Contract it enters into with a Supplier when it also enters into:

a)            an ATP with Entity A, and

b)            an AA with Entity A and the Supplier in respect of the Supply Contract?

Answer 2

Yes. Entity B is entitled to an input tax credit under section 11-20 of the GST Act relating to the supplyof goods and/or services under a Supply Contract it enters into with a Supplier when it also enters into:

a)            an ATP with Entity A, and

b)            an AA with Entity A and the Supplier in respect of the Supply Contract.

Relevant facts and circumstances

Entity A is registered for GST.

Entity B is registered for GST.

Entity A and Entity B entered into an ATP for Entity A to pay a Supplier of goods and/or services on behalf of Entity B for the acquisition of goods and/or services, including the related goods and services tax (GST). Under the ATP, Entity B will reimburse Entity A the payment Entity A made to a Supplier.

Entity A also entered in an AA with Entity B and the Supplier of relevant goods and/or services from whom Entity B acquired goods and/or services. Under the AA, Entity A agrees to pay, on behalf of Entity B, the consideration including the related GST for the goods and/or services under a Supply Contract between Entity B and the Supplier.

Relevant legislative provisions

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

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

Reasons for decision

All legislative references are to the GST Act unless otherwise stated.

Under section 11-20, an Entity is entitled to an input tax credit for any creditable acquisition it makes.

Section 11-5 provides the criteria for making a creditable acquisition as follows:

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.

Based on the facts, it is Entity B that entered into a Supply Contract with the Supplier for the purchase of the goods and/or services. Entity A is not a party to the Supply Contract.

The Supplier's obligation under the Supply Contract to deliver the goods and/or services to Entity B is not altered or changed in anyway by the entry into the ATP or AA by the relevant parties.

Therefore, it is accepted that it is Entity B that makes the acquisition of the goods and/or services.

To the extent that the acquisition of the goods and/or services does not relate to making supplies that would be input taxed or is of a private or domestic nature, the acquisition of the Goods will be for a creditable purpose. Paragraph 11-5(a) is satisfied.

As the supply of goods and/or services from the Supplier under the Supply Contract is taxable supply, paragraph 11-5(b) is satisfied.

Paragraph 11-5(d) is also satisfied as Entity B is registered for GST.

Therefore, it needs to be determined whether Entity B provides or is liable to provide consideration for the supply after it entered into the ATP and the AA.

The Supplier of goods and/or services and Entity B entered into the Supply Contract and it is clear that under the contract, Entity B is the entity that is liable to provide consideration for the supply of the goods and/or services.

For the purposes of section 11-5, under the ATP and the AA, Entity A makes payment on behalf of Entity B to the Supplier in respect of the supply of the goods and/or services.

In effect, Entity A is acting as a paying agent and facilitates the payment to the Supplier on behalf of Entity B. Entity A is reimbursed by Entity B for making payment on their behalf.

Therefore, for the purposes of section 11-5, Entity B either provides, or is liable to provide, consideration for the supply of the goods and/or services under the Supply Contract. Entry into the ATP and the AA does not alter this.

As all of the requirements of section 11-5 are met in respect of the acquisition of the goods and/or services by Entity B, it is Entity B that is entitled to the input tax credit for that acquisition. Entity A will not be entitled to claim any input tax credit in respect of the supply of the goods and/or services under the Supply Contract.