Private ruling: GST and the sale of a new motor vehicle (car) to a disabled veteran
Published: September 2011

Ruling: Q1: Can the sale of the car to an individual be treated as GST-free now that they have been granted the T&PI pension effective from a date prior to the purchase of the car? | A1: Yes.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You sold a car to an individual with GST included in the price. The price of the car is below the car limit. You have remitted to the ATO the GST paid on the car. The individual had served in the Australian armed forces. At the time of purchasing the car, the individual had applied to the Department of Veterans' Affairs (DVA) for a pension under Part II of the Veterans Entitlements Act 1986 as result of being totally and permanently incapacitated due to war service (the T&PI pension) but was turned down. The individual objected to this decision to the Veterans' Review Board (an independent Government body with the delegation to review and overturn pension decisions made by DVA). At the time of purchasing the car, the individual was awaiting the outcome of his objection. The Veterans' Review Board overturned DVA's decision and found that the individual was entitled to receive the T&PI pension, effective from the date of their original pension application, this being a date prior to the purchase of the car. The individual is uncertain if they had provided you with the required declaration stating they intend to use the car for their own personal transportation for a period of up to two years or until the car has travelled 40,000 kilometres from the date of purchase. The individual has since made this declaration and it is included with this private ruling for your records.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 38-505 | Veterans Entitlements Act 1986 Section 24 | Part II | Taxation Administration Act 1953 Section 105-65 of Schedule 1

Reasons for decision: Summary: Section 38-505 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that the supply of a car to an individual is GST-free if the individual: · has served in the Defence Force or any other armed force of Her Majesty · as a result of their service is a veteran to whom section 24 of the Veterans Entitlements Act 1986 (VEA) applies · receives a pension under Part II of the VEA, that is, a pension for being totally and permanently incapacitated due to war service (the T&PI pension), and · intends to use the car in his or her personal transportation for a period of up to two years or until the car has travelled 40,000 kilometres. In this case, the individual has served in the Australian armed forces which are armed forces of Her Majesty. As a result of his service, the individual is a veteran to whom section 24 of the VEA applies. At the time of purchasing the car, the individual was not in receipt of a T&PI pension. However, they were awaiting the outcome of their objection to the Veterans' Review Board in relation to DVA's decision not to grant the T&PI pension. The Veterans' Review Board overturned DVA's decision and found that the individual was entitled to receive the T&PI pension effective from a date prior to the purchase of the car. As a consequence of the Veterans' Review Board's decision, the ATO accepts that the individual receives a pension under Part II of the VEA, this being the T&PI pension, and that as a consequence of making the effective prior to the purchase date of the car, the individual had been in receipt of the T&PI pension at the time of the purchase. Finally, the individual is uncertain if they have provided you with the required declaration stating they intend to use the car for their own personal transportation for a period of up to two years or until the car has travelled 40,000 kilometres from the date of purchase. The individual has since made this declaration and it is included with this private ruling for your records. Hence, given that the requirements of section 38-505 of the GST are satisfied, the sale of the car to the individual should now be treated as being GST-free. Procedure to correct the GST treatment of the sale At the time of purchase, you correctly sold the car to the individual as a taxable supply. However, now that the individual has been granted the T&PI effective from a date prior to the purchase of the car, the sale can now be treated as being GST-free. To remedy this situation, you would first need to make a refund to the individual of the GST they have paid then claim the corresponding amount from the ATO. This is in accordance with section 105-65 of Schedule 1 to the Taxation Administration Act 1953 . You may be able to claim the overpaid GST amount on your next or subsequent activity statement provided you are within the correction limits. These limits are given in the enclosed fact sheet Correcting GST mistakes . If you are outside these limits then to claim the refund you must revise the original activity statement where you reported the overpaid GST.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.