Private ruling: GST and claiming input tax credits
Date of advice: 17 August 2015
Published: August 2015

Ruling: Q1: Can the Commissioner of Taxation (Commissioner) confirm that Entity X, a State government entity, is: (a) entitled to claim an input tax credit on the subsidy payments it makes to the relevant taxi operators; and (b) not required to hold a tax invoice for the subsidy payments in order to claim the associated input tax credits. | A1: The Commissioner confirms that Entity X is: (a) entitled to claim an input tax credit on the subsidy payments it makes to the relevant taxi operators; and (b) not required to hold a tax invoice for the subsidy payments in order to claim the associated input tax credits given that the value of the taxable supply does not exceed $75.

Relevant facts and circumstances: Entity X is an entity of the State. Entity X is responsible for issuing taxi licences and regulating the taxi industry in the relevant State. Entity X carries on an enterprise and is registered for GST. Entity X operates a particular scheme (the Scheme) which allows individuals to apply to Entity X to receive subsidised taxi travel provided by a taxi operator. Once approved under the terms of the Scheme the passenger is issued with a card (Card) which allows the eligible passengers to travel in any licensed taxi and pay a lower fare than passengers who are not eligible for the Scheme. Statutory provisions require that licenced taxi operators charge concessional fares to passengers that are eligible under the Scheme. When a taxi operator provides a taxi service to an eligible passenger, the tax operator charges that passenger a concessional fair and Entity X pays the taxi operator the remainder of the fare that would otherwise have been charged by way of a subsidy. Under the Scheme the maximum fair amount for a passenger trip will never exceed $75, therefore the amount of the subsidy payment that the State will provide for a single passengers trip will always be less than $75.00. Previously taxi operators in the State provided Entity X with individual tax invoices in order to receive their subsidies. The tax invoice issued by that taxi operator to the State for the subsidy was required to detail the: • taxi operators ABN and licensee number, • total number of trips taken, • number of trips claimed; and • total trip fees claimed. Upon receipt of the tax invoices Entity X would make a payment to the taxi operator of the subsidy amount and claim the input tax credit. A new system has been introduced in respect of the Scheme where the Card issued to the passenger (by Entity X) is accepted by the taxi operator and recognised by the Electronic Funds Transfer at Point of Sale (EFTPOS) machine in each taxi. When a taxi service is provided, the passenger swipes the Card on the taxi EFTPOS terminal to deduct their eligible subsidy. The remaining balance of the metered fare is paid by the passenger. Where a taxi is not fitted with a terminal a manual voucher is completed. Under this system, Entity X is invoiced directly by a third party operator (Entity Y) for the concessions applied using the EFTPOS machine and/or vouchers. The invoice generated is a bulk invoice for all the subsidy charges (through the EFTPOS terminal and vouchers) presented to all the taxi operators across the State. At the end of every month Entity Y pay each taxi operator the required subsidy on behalf of Entity X and send the bulk invoice for the total of the subsidy payments made. Under the contract between Entity X and Entity Y (the Contract), Entity Y is required to provide Entity X a detailed tax invoice for all trips made during the payment period. The invoice Entity Y currently includes the following information: • Entity Y's • date of the invoice • name of each taxi operator or network • number of taxi trips undertaken by each taxi operator or network for the month • total number of taxi rips and the total amount paid • a statement that the amount paid is inclusive of GST. Under the Contract, one of the requirements of the service is for the capture of, and reporting on, trip details. The Contract between Entity X and Entity Y provides that Entity Y is authorised to act on behalf of Entity X to facilitate the operation of the Scheme. This involves Entity Y accepting and swiping the Card provided by a passenger (using the EFTPOS machine) and notifying Entity X, by way of providing an invoice, of the amounts owed (total subsidy payments) to the taxi operator. Although the Contract set out relevant terms, which Entity X have requested from Entity Y, the information has not been provided by Entity Y. Entity Y have advised Entity X that if the clauses were enforced the Contract would be considered onerous; where the costs of meeting the obligations under the Contract would exceed the economic benefit expected to be received under it. The invoice generated by Entity Y contains sufficient information to determine: • the name of the taxi operator to which the subsidy has been paid, • the number of trips taken by each operator per day, • the total number of trips, • the total amount of the subsidy paid, and • a statement to identity that the payment is inclusive of GST. The invoice generated by Entity Y does not provide the ABN of each of the taxi operators who provides the taxi services or the individual taxi drivers licence or accreditation details. It also does not provide the name of the person/passenger using the Card. Since the new system was preceded by a manual system whereby taxi operators had to supply a tax invoice to Entity X which included their ABN, Entity X should already have all that information on hand. As only eligible passengers are able to use the Card, Entity X can also identify the group of people that have used the taxi services. The payment of the subsidy by Entity X does not relate to any input taxed supplies made by Entity X.

Relevant legislative provisions: 11-5 of the New tax System (Goods and Services Tax) Act 1999 | 29-10 of the New tax System (Goods and Services Tax) Act 1999 | 29-70 of the New tax System (Goods and Services Tax) Act 1999 | 29-80 of the New tax System (Goods and Services Tax) Act 1999

Reasons for decision: Detailed Reasoning - Question 1a: It is submitted by Entity X that the subsidy paid by them to the taxi operator is the consideration for their acquisition from the taxi operator, and that this is a creditable acquisition for which they are entitled to an input tax credit. This is on the basis that the arrangement is akin to paragraphs 217 and 217A in Goods and services tax ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9), in which one set of activities constitute the making of two supplies. Consistent with the Commissioners views in paragraphs 221C and 221E in GSTR 2006/9, Entity X considers that the arrangements between Entity X, an eligible passenger and the taxi operator consist of a pre-existing framework and/or agreements. Relevantly the Scheme is a pre-existing agreement between the payer, being Entity X, and the supplier, being the taxi operator, which contemplates that the taxi operators undertake their activities in accordance with the Scheme. That pre-existing framework is set out in the taxi licence conditions that bind all licensed taxi operators in the State. Further the Scheme: • identifies the eligible passengers by giving them a Card; • ensures that the taxi operators will be paid for their supply upon the eligible passenger producing and swiping the Card. Consequently Entity X makes an acquisition from the taxi operator of the service of transporting the eligible passenger. We agree with this submission. Therefore where the acquisition by Entity X satisfies the requirements under section 11-5 of the GST Act Entity X will make a creditable acquisition. Pursuant to section 11-5 of the GST Act 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. (terms marked with asterisks (*) are defined in section 195-1 of the GST Act) In this case, given that Entity X will satisfy the requirements of 11-5 of the GST Act the Commissioner accepts that Entity X makes a creditable acquisition and will be entitled to an input tax credit of the GST included in the subsidy. | Detailed Reasoning - Question 1b: Section 29-10 of the GST Act sets out how an entity attributes the input tax credits for creditable acquisitions. Relevantly subsection 29-10(1) provides that the input tax credit to which an entity is entitled for a creditable acquisition is attributable to: (a) the tax period in which you provide any of the *consideration for the acquisition; or (b) if, before you provide any consideration, an *invoice is issued relating to the acquisitions - the tax period in which the invoice is issued. Further 29-10(3) of the GST Act states: (3) If you do not hold a *tax invoice for a creditable acquisition when you give the Commissioner a *GST return for the tax period to which the input tax credit (or any part of the input tax credit) on the acquisition would otherwise be attributable: (a) the input tax credit (including any part of the input tax credit) is not attributable to that tax period; and (b) the input tax credit (or part) is attributable to the first tax period for which you give the Commissioner a GST return at a time when you hold that tax invoice. The requirement for a tax invoice a set out in section 29-70 of the GST Act and amongst other things a tax invoice is required to contain sufficient information to ascertain the supplier's identity and the supplier's ABN. However section 29-80 of the GST Act provides that a tax invoice and adjustment note is not required for a low value transaction. Relevantly section 29-80(1) of the GST Act states: Subsection 29-10(3) and 29-70(2) do not apply to a *creditable acquisition that relates to a *taxable supply the *value of which does not exceed $50, or such higher amount as the regulations specify. In this case the supply made by the taxi operator to Entity X is for consideration (the subsidy payment amount). The subsidy amount which arises for each journey provided by the taxi operator where the eligible passenger presents their Card does not exceed $75. Accordingly for the purposes of attributing the input tax credit Entity X is not required to hold a tax invoice to claim the relevant input tax credit as the value of the taxable supply made by the taxi operators to Entity X is a low value transaction.