Edited version of private advice

Authorisation Number: 1052402599244

Date of advice: 12 June 2025

Ruling

Subject: GST - input tax credits

Question 1

Is the entity entitled to input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 for acquisitions that it makes in relation to its charitable activities?

Answer 1

Yes, the entity is entitled to input tax credits for acquisitions that it makes.

Relevant facts and circumstances

The entity is an Australian Charities and Not-for-Profit Commission registered charity that provides donations and grants to other charities and other organisations.

The entity is registered for GST.

In the course of its activities, the entity incurs operating expenses, including audit fees, management and administration expenses, consultancy fees and travel expenses. All acquisitions relate to the entity's charitable purposes, and none are made for a private or domestic purpose.

The entity owns part of a property. This property is held for conservation purposes in line with the entity's charitable purpose and generates no income. The property does not have any buildings located on the land.

The entity has provided a low interest loan as part of its charitable activities. The only direct cost associated with the loan was the associated legal costs. This loan and the associated mortgage are the only input taxed supplies made by the entity. Aside from the loan provided, the entity does not hold any other financial investments.

The entity does not exceed the financial acquisitions threshold under Division 189 of the A New Tax System (Goods and Services Tax) Act 1999.

Assumptions

All acquisitions made by the entity are taxable supplies to the entity. The entity provides consideration for all acquisitions and the entity holds a valid tax invoice for the acquisitions.

The acquisitions made by the entity are not non-deductible acquisitions under Division 69 of the A New Tax System (Goods and Services Tax) Act 1999.

Relevant legislative provisions

A New Tax System (Goods and Services Tax Act 1999 section 9-20

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

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

Reasons for decision

Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that 'you are entitled to the input tax credit for any creditable acquisition that you make'.

Under section 11-5 of the GST Act, the entity makes a creditable acquisition if:

•                     it acquires anything for a creditable purpose; and

•                     the supply of the thing to the entity is a taxable supply; and

•                     the entity provides, or is liable to provide, consideration (payment) for the supply; and

•                     the entity is registered, or required to be registered for GST.

Generally, subsections 11-15(1) and (2) of the GST Act provide that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise and the acquisition:

•                     doesn't relate to making supplies that would be input taxed; or

•                     is not of a private or domestic nature.

An enterprise is defined by paragraph 9-20(1)(e) of the GST Act to include an activity or series of activities done by a charity. Accordingly, the activities undertaken by the entity constitute an enterprise for GST purposes. This includes the receipt of the distributions, the payment of donations and grants to other organisations, the management of the property owned by the entity and other related activities.

The entity acquires a thing for a creditable purpose to the extent that it acquires the thing in carrying on its enterprise. However, under subsection 11-15(2) of the GST Act, it does not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed. Although the entity has made an input taxed supply of a loan, as it doesn't exceed the financial acquisitions threshold, subsection 11-15(4) of the GST Act operates to ensure that acquisitions which relate to making input taxed financial supplies are not stopped from being creditable acquisitions.

Finally, as the acquisitions of the entity are not of a private or domestic nature, the acquisitions are made for a creditable purpose.

As the supplies to the entity are taxable supplies; the entity provides consideration for the acquisitions and the entity is registered for GST, it is making creditable acquisitions under section 11-5 of the GST Act. Therefore, the entity is entitled to the input tax credits, under section 11-20 of the GST Act, on those creditable acquisitions.

Note: Division 111 of the GST Act operates to allow an entity to claim input tax credits where it reimburses an employee, agent, officer, partner or volunteer for expenses they incur in connection with carrying on the entity's enterprise. To enable the entity to claim the input tax credit, the employee, agent, officer, partner or volunteer will need to provide the entity with the tax invoice for the acquisition they have made.