ATO ID 2004/302: GST and construction of a car park on leased residential premises used for carrying on an enterprise
Date of decision: 26 April 2002
Business line: Indirect Tax

Issue
Is the entity, a business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for the acquisitions it makes to construct a car park on residential premises that it leases solely for the purpose of operating its business?

Decision
Yes, the entity is entitled to an input tax credit under section 11-20 of the GST Act for the acquisitions it makes to construct a car park on residential premises that it leases solely for the purpose of operating its business.

Facts
The entity is a business operator. The entity operates its business from residential premises that it leases from a landlord. The entity does not make supplies that are input taxed. The entity has approval from the landlord to construct a car park on the residential premises. The car park is being built to provide parking facilities to be used solely by the entity's staff and customers. The entity pays for the acquisition of the goods and services required to construct the car park. The entity does not receive any reimbursement from the landlord either directly (for example, a direct payment) or indirectly (for example, a reduction in the lease payments) for these acquisitions. The entity is registered for goods and services tax (GST). The supply of the goods and services to the entity for the construction of the car park were taxable supplies under section 9-5 of the GST Act.

Reasons for decision
Summary: Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if: The first requirement in section 11-5 of the GST Act is that the entity makes the acquisition solely or partly for a creditable purpose. Under subsection 11-15(1) of the GST Act, an entity acquires a thing for a creditable purpose to the extent that it acquires the thing in carrying on its enterprise. The entity is constructing a car park to provide car parking facilities to be used solely by its staff and customers. The entity is constructing the car park on the leased residential premises, from which the entity operates its business. Therefore, the entity acquires the goods and services in the course of conducting its enterprise. However, subsection 11-15(2) of the GST Act provides that an entity does not acquire the thing for a creditable purpose to the extent that: The entity acquires goods and services in the course of conducting its enterprise, and they are not of a private or domestic nature. Further, the acquisition of the goods and services to construct the car park do not relate to making supplies by the entity that would be input taxed. As a result, subsection 11-15(2) of the GST Act does not apply and the acquisitions are for a creditable purpose. The goods and services that the entity acquires in the construction of the car park were taxable supplies made to the entity under section 9-5 of the GST Act. The entity has paid for all of the acquisitions and has not been reimbursed by the landlord in any way. In addition, the entity is registered for GST. As such, the requirements of section 11-5 of the GST Act are satisfied and the entity is making a creditable acquisition when it acquires goods and services associated with constructing the car park. Therefore, the entity is entitled to an input tax credit under section 11-20 of the GST Act when it acquires goods and services to construct a car park on residential premises that it leases for the purpose of operating its business.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 11-5 section 11-15 subsection 11-15(1) subsection 11-15(2) section 11-20 section 40-35
Subject references: Goods and services tax Taxable supply Creditable acquisition GST input tax credits & creditable acquisitions Creditable purpose