Private ruling: GST and reduced credit acquisitions
Date of advice: 26 June 2015
Published: June 2015

Ruling: Q1: Is the entity making a reduced credit acquisition under section 70-5 of the A New Tax System (Goods and Services Tax) Act 1999 when it pays an amount under the Memorandum of Understanding? | A1: Yes, the entity is making a reduced credit acquisition. | Q2: Is the entity making a reduced credit acquisition under section 70-5 of the A New Tax System (Goods and Services Tax) Act 1999 when it pays an amount under the Memorandum of Understanding? | A2: No, the entity is not making a reduced credit acquisition.


Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 70-5 | A New Tax System (Goods and Services Tax) Regulations 1999 subregulation 70-5.02(2)

Reasons for decision: Summary: Section 70-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that certain specified kinds of acquisitions (reduced credit acquisitions) which relate to making financial supplies give rise to a reduced input tax credit. The table in subregulation 70-5.02(2) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) provides a list of reduced credit acquisitions. Item 9 of the table in subregulation 70-5.02(2) of the GST Regulations provides that an acquisition of the arrangement by a financial supply facilitator of the provision, acquisition or disposal of an interest in a security is a reduced credit acquisition. Consequently, the acquisition fits within Item 9 of the table in subregulation 70-5.02(2) of the GST Regulations. The entity is therefore, making a reduced credit acquisition under section 70-5 of the GST Act. As there are items in the table in subregulation 70-5.02(2) of the GST Regulations for which the payment appears to be consideration, the entity is not making a reduced credit acquisition under section 70-5 of the GST Act.