Private ruling: GST and entitlement to input tax credits
Published: September 2014

Ruling: Q1: Are you entitled to claim input tax credits on the purchase of goods from entity Y? | A1: Yes. | Q2: Can any refunds payable to you be paid into a trust account held by your registered tax agent? | A2: Yes.

Relevant facts and circumstances: You are a non-resident. You carry on a specified enterprise in an overseas country. You are registered for GST. You have a contract with entity X for the supply of specified services to X in Australia. X is a resident of Australia. You will be operating in Australia temporarily for the duration of your contract with X which is more than a year. Under the contract there are a specified number of milestones to be achieved. You receive a specified amount from X per milestone achieved. You acquire goods from Y in Australia for a specified amount per arrangement. You acquire the goods solely for the purpose of providing services to X. The supplies of the goods by Y to you are taxable supplies. You will incur a loss of approximately $A resulting in a $B net GST refund. The reason for the loss is that the work was underquoted unintentionally. You have to fulfil your contractual obligations despite your anticipated financial loss. You will be sued in the event of non-completion or cancellation of the contract and are highly concerned that your reputation will be damaged which will adversely affect your ability to promote future business dealings with clients including X. You and X are not related entities. You and Y are not related parties. None of the parties involved are related parties. You and X have other contracts which are not based in Australia. You have been treating the supplies that you make to X in Australia as taxable supplies. You have been issuing tax invoices for the supplies and including GST in the price. You do not require any advice on this matter. You want the GST refunds that are payable to you to be paid into a trust account held by your registered tax agent.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 11-5. | A New Tax System (Goods and Services Tax) Act 1999 Section 11-15. | A New Tax System (Goods and Services Tax) Act 1999 Section 11-20. | Taxation Administration Act 1953 Subsection 8AAZLH(2). | Taxation Administration Act 1953 Subsection 8AAZLH(2A).

Reasons for decision: Summary: You are entitled to claim input tax credits on the acquisitions of goods from Y as the acquisitions are creditable acquisitions. | Detailed Reasoning - Detailed reasoning: Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you are entitled to the input tax credit for any creditable acquisition that you make. Section 11-5 of the GST Act states: 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 are liable to provide, *consideration for the supply; and (d) you are *registered, or *required to be registered. (* denotes a term defined in section 195-1 of the GST Act) For an acquisition to be a creditable acquisition all the requirements of section 11-5 of the GST Act must be met. Paragraph 11-5(a) of the GST Act requires that you make an acquisition for a creditable purpose. Subsection 11-15(1) of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, according to subsection 11-15(2) of the GST Act, you do not acquire the thing for a creditable purpose to the extent that the acquisition: (a) relates to making supplies that would be input taxed, or (b) is of a private or domestic nature. You advised that you carry on a specified enterprise overseas. You have entered into a contract with X to provide your services to X in Australia. You stated you will be making a loss under the contract however this is due to the work being underquoted unintentionally. You further advised that none of the entities involved are related entities and that you acquire the goods from Y solely for the purpose of providing services to X. Based on the information provided, we accept that the acquisitions that you make in order to provide your services to X are in carrying on your enterprise. Further the acquisitions are neither related to making supplies that would be input taxed nor of a private or domestic nature. Therefore you meet the requirement of paragraph 11-5(a) of the GST Act as you acquire the goods solely for a creditable purpose. You also meet the requirements of paragraphs 11-5(b), 11-5(c) and 11-5(d) of the GST Act. This is because, you provide and are liable to provide consideration for the supply of goods by Y, the supply of the goods to you is a taxable supply and you are registered for GST. | Summary: You can nominate an account held by your registered tax agent in Australia as the account into which you want the refunds to be paid. | Detailed Reasoning - Detailed reasoning: Subsection 8AAZLH(2) of the Taxation Administration Act 1953 (TAA) provides that the Commissioner must pay running balance account (RBA) surpluses, or excess non-RBA credits that relate to an RBA to the credit of a financial institution account nominated by the entity. This account must be maintained at a branch or office of the institution that is in Australia and the nomination must be in the approved form. Subsection 8AAZLH(2A) of the TAA provides that the account must be one held by: • the entity entitled to the refund, or • jointly held by that entity with other entities, or • held by the registered tax agent or BAS agent of the entity, or • held by a legal practitioner acting as a trustee or executor for the entity. You can nominate an account held by your registered tax agent as the account into which you want the refunds to be paid. For further information on refunds of RBA surpluses and credits refer to Practice Statement Law Administration PS LA 2011/22.