ATO ID 2004/167: GST and disposal of a GST-free car by an eligible disabled person
Date of decision: 9 July 2002
Business line: Indirect Tax

Issue
Does the entity, an eligible disabled person who purchased a car GST-free under Subdivision 38-P of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), have a goods and services tax (GST) liability when they dispose of the car before the 'Subdivision 38-P period' has expired?

Decision
No, the entity does not incur a GST liability when they dispose of the car before the 'Subdivision 38-P period' has expired.

Facts
The entity is an individual who is an eligible disabled person. The entity purchased a car GST-free under Subdivision 38-P of the GST Act. At the time of purchasing the car the entity had the intention of using it for the prescribed use under Subdivision 38-P of the GST Act for at least two years or until the car travelled 40,000 kilometres. Due to the entity's deteriorating medical condition, the car was no longer suitable for their needs. The entity disposed of the car in order to purchase a more suitable car. The entity owned the car for less than two years and the car had travelled less than 40,000 kilometres. The entity is not registered or required to be registered for GST.

Reasons for decision
Summary: Under Subdivision 38-P of the GST Act, a supply of a car to a disabled person may be GST-free. One of the requirements for a supply of a car to be GST-free is that the eligible disabled person intends to use the car for the prescribed use under Subdivision 38-P of the GST Act during all of the 'Subdivision 38-P period'. Section 195-1 of the GST Act defines the 'Subdivision 38-P period', in relation to the supply of a car to an individual, as the period starting when he or she acquires the car and ending at the earliest of the following times: For the purposes of paragraph (c) of the above definition, the Commissioner considers that an appropriate circumstance is where the car has travelled 40,000 kilometres. The entity satisfied the intention test at the time of purchase of the car. The entity's deteriorating medical condition required the individual to dispose of the car before the end of the 'Subdivision 38-P period'. There are no provisions in the GST Act that impose a GST liability where an eligible disabled person acquires a car GST-free and disposes of it before the 'Subdivision 38-P period' has expired. Therefore, the entity will not incur a GST liability when they dispose of the car before the 'Subdivision 38-P period' has expired.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-P section 195-1
Related ATO interpretative decisions: ATO ID 2001/395 | ATO ID 2001/496
Subject references: Goods and services tax GST free Cars for disabled veterans Cars for other disabled people