Edited version of private advice

Authorisation Number: 1052408373315

Date of advice: 16 June 2025

Ruling

Subject: GST - second-hand goods

Question 1

Are you making a creditable acquisition of second-hand goods for which you are entitled to claim input tax credits, under Division 66 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when you acquire and pay for goods from non-registered customers?

Answer 1

Yes, where you acquire and pay for goods from non-registered customers you are entitled to claim input tax credits under Division 66 of the GST Act.

This ruling applies for the following periods:

Xx to xx

The scheme commenced on:

Xx xx xxxx

Relevant facts and circumstances

You are registered for GST.

You purchase and take ownership of second-hand goods from customers who are not registered, or required to be registered, for GST.

You will make a taxable supply of the goods.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-15

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

A New Tax System (Goods and Services Tax) Act 1999 section 11-10

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-10(3)

A New Tax System (Goods and Services Tax) Act 1999 section 66-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 66-5(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 66-5(2)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 66-5(2)(a)

A New Tax System (Goods and Services Tax) Act 1999 section 66-17

A New Tax System (Goods and Services Tax) Act 1999 subparagraph 66-17(1)(a)

Reasons for decision

Division 11 of the GST Act contains the basic rules about whether an acquisition is a 'creditable acquisition'. Under section 11-20 of the GST Act an entity is entitled to an input tax credit for any creditable acquisition they make provided the entity satisfies section 11-5 of the GST Act.

Section 11-5 of the GST Act states that 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 a liable to provide, *consideration for the supply; and

(d)           you are *registered, or *required to be registered.

(* denotes a term defined in section 195-1 of the GST Act)

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, you are acquiring goods from customers in the course of carrying on your enterprise and make a payment to customers for the goods. Paragraph 11-5(a) of the GST Act is satisfied as, under section 11-15 of the GST Act, you acquire goods in carrying on your enterprise and the acquisition does not relate to supplies that would be input taxed or of a private of domestic nature. Paragraph 11-5(c) of the GST Act is met as you are providing consideration for the supply made by the customer to you. Paragraph 11-5(d) of the GST Act is also satisfied as you are registered for GST.

The supply of the thing to you is a taxable supply

Paragraph 11-5(b) of the GST Act requires that the supply of the thing to you is a 'taxable' supply within the meaning of section 9-5 of the GST Act.

The supply of goods to you by customers who are not registered, or required to be registered, for GST is not a taxable supply under section 9-5 of the GST Act. As the requirement in paragraph 11-5(b) of the GST Act has not been met, your acquisition of goods is not a creditable acquisition under section 11-5 of the GST Act.

However, Division 66 of the GST Act allows input tax credits to be claimed for acquisitions of second-hand goods, even though GST was not payable on the supply of the goods to you. If subsection 66-5(1) of the GST Act is satisfied, and the requirements of section 11-5 of the GST Act are otherwise met, the acquisition of second-hand goods by a registered entity will be a creditable acquisition to the extent that subsection 66-5(2) of the GST Act does not apply.

Section 66-5 of the GST Act states:

Creditable acquisitions of second-hand goods

(1)           If you acquire *second-hand goods for the purposes of sale or exchange (but not for manufacture) in the ordinary course of *business, the fact that the supply of the goods to you is not a *taxable supply does not stop the acquisition being a *creditable acquisition.

(2)           However, this section does not apply, and is taken never to have applied, to the acquisition if:

(a)           the supply of the goods to you was a *taxable supply, or was *GST-free; or

(b)           you *imported the goods; or

(c)           the supply of the goods to you was a supply by way of hire; or

(d)           Subdivision 66-B applies to the acquisition; or

(e)           you make a supply of the goods that is not a taxable supply.

(3)           This section has effect despite section 11-5 (which is about what is a creditable acquisition).

'Second-hand goods' is defined in section 195-1 of the GST Act as follows:

second-hand goods does not include:

(a)           goods (except *incidental valuable metal goods) to the extent they consist of *valuable metal; or

(b)           [Repealed]

(c)           animals or plants.

Paragraph 37 of Goods and Services Tax Ruling GSTR 2005/3, Goods and services tax: arrangements of the kind described in Taxpayer Alert TA 2004/9 - exploitation of the second-hand goods provisions to obtain input tax credits (GSTR 2005/3) states:

37. As the meaning of second-hand goods provided in section 195-1 is not exhaustive, the term takes its ordinary meaning. The ordinary meaning of 'second-hand', depending on its context, contemplates previous use or previous ownership, or both.

Application of Division 66 of the GST Act

In this case, you acquire and take ownership of goods from customers. They have previously been owned and used by the customer and therefore fall within the definition of 'second-hand goods.' You will further make a taxable supply of those goods.

You acquired the goods for the purposes of selling them in the course of running your enterprise. The goods are sold in the same condition you acquire them and have been acquired for sale or exchange and not for manufacture. This is consistent with the position in GSTD 2013/2 'Goods and services tax: when are second-hand goods acquired for the purpose of sale in the ordinary course of business under Division 66 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?'.

Subsection 66-5(1) of the GST Act applies to allow input tax credits on the acquisition of second-hand goods unless subsection 66-5(2) of the GST Act applies. You have not imported the goods, nor acquired the goods by way of hire. Subdivision 66-B of the GST Act (relating to acquisitions of second-hand goods that are divided for re-supply) does not apply to the acquisition and you make a taxable supply of the goods. Therefore, paragraphs 66-5(2)(b), 66-5(2)(c), 66-5(2)(d), and 66-5(2)(e) of the GST Act do not apply to prevent you from claiming input tax credits in respect of the creditable acquisition of goods.

As set out above, the supply of the goods to you was not a taxable supply. Therefore, paragraph 66-5(2)(a) of the GST Act, also does not apply to prevent you from claiming input tax credits in respect of the creditable acquisition of the goods.

Your acquisition of goods satisfies the requirements of Division 66 of the GST Act. Therefore, your acquisition of goods is a creditable acquisition, and you can claim input tax credits for goods that you acquire from customers who are not registered for GST.

Other information

Record keeping

Subsection 29-10(3) of the GST Act requires you to hold a tax invoice to allow you to attribute input tax credits. A valid tax invoice will not be available where you receive goods from a customer who is not registered for GST. In this case, section 66-17 of the GST Acts applies to vary this outcome for acquisitions of second-hand goods and requires you to prepare records which are similar to tax invoices to substantiate your input tax credit.

Section 66-17 of the GST Act states:

(1)           If you make a creditable acquisition of second-hand goods and the supply of the goods to you was not a taxable supply:

(a)           subsection 29-10(3) applies to the acquisition as if references to a tax invoice were references to a record you prepared that complies with this section; and

(b)           subsection 29-20(3) applies to an adjustment event relating to the acquisition as if references to an adjustment note were references to a record you prepared that complies with this section.

(2)           To comply with this section, the record must:

(a)           set out the name and address of the entity that supplied the goods to you; and

(b)           describe the goods (including their quantity); and

(c)           set out the date of, and the *consideration for, the acquisition.

(2A) Subsection 29-10(3) does not apply to a creditable acquisition of second-hand goods if:

(a)           the supply to which the acquisition relates is not a taxable supply; and

(b)           the amount that would have been the value of the supply (if it had been a taxable supply) does not exceed $50, or such higher amount as the regulations made for the purposes of subsection 29-80(1) specify.

(2B) Subsection 29-20(3) does not apply to a decreasing adjustment relating to a creditable acquisition of second-hand goods if:

(a)           the supply to which the acquisition relates is not a taxable supply; and

(b)           the amount of the adjustment does not exceed $50, or such higher amount as the regulations made for the purposes of subsection 29-80(2) specify.

(3)           This section has effect despite section 29-10 (which is about attributing the input tax credits for creditable acquisitions) and section 29-20 (which is about attributing decreasing adjustments).

Paragraph 66-17(1)(a) of the GST Act replaces the requirement for a tax invoice with a '...record you prepared that complies with this section'. The requirements of the section are set out in subsection 66-17(2) of the GST Act which states that the record must set out the name and address of the entity that supplied the goods to you, describe the goods (including their quantity) and set out the date of, and consideration for, the acquisition.

Consistent with the normal tax invoice rules, where the supply to which the acquisition relates is not a taxable supply and the amount that would have been the value of the supply (if it had been a taxable supply) does not exceed $75, then the record is not required to claim an input tax credit; subsection 66-17(2A) of the GST Act.