Private ruling: GST and the car limit
Date of advice: 15 July 2021
Published: September 2021
Ruling period: Period ending 30 June 20XX

Ruling: Q1: Does the car limit apply under subsection 69-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to limit the input tax credits claimable for the purchase of a race car that was built for race track use only and cannot be registered for use on public roads? | A1: No, the car limit does not apply as the race car is not considered a 'car' for the purposes of section 69-10(1) of the GST Act.

Relevant facts and circumstances: You are registered for GST.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 69-10(1) | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: The amount of input tax credit for a creditable acquisition is equal to the GST payable on the supply of thing acquired unless: 1. the acquisition is partly creditable; in which case, the GST credit is worked out based on the extent of the creditable purpose, or 2. subsection 69-10(1) of the GST Act applies. Subsection 69-10(1) of the GST Act limits the amount of input tax credit for a creditable acquisition or creditable importation of a 'car'. Where the GST inclusive market value of the 'car' exceeds the 'car limit' for the financial year in which you first used the car for any purpose, the amount of input tax credit is 1/11th of that limit. For the purpose of subsection 69-10(1) of the GST Act, a 'car' is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). Section 995-1 of the ITAA 1997 defines a 'car' as a motor vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers and further defines a motor vehicle as any motor-powered 'road vehicle' (including a 4-wheel drive vehicle). What is the meaning of 'road vehicle'? 'Road vehicle' is not defined in the GST Act or ITAA Act. However, guidance could be drawn from the Goods and Services Tax Advice GSTA TPP 077 Goods and services tax: Can an entity that purchases a rally car with a market value that exceeds the car limit claim input tax credits in excess of 1/11th of the car limit? (GSTA TPP 077) which explored the definition of a 'car' and, relevantly, 'motor vehicle' for the purposes of input tax credit claims. GSTA TPP 077 referred to paragraph 3.2 of the Sales Tax Ruling SST 13 which stated the following: The term 'road vehicle' refers to the class of vehicle, not to the actual use to which a particular vehicle may be put. It is a road vehicle if it is in a class of vehicle that is designed for use on public roads and it would be a road vehicle even though it may never be used or registered for use on public roads. Reference to the class of vehicle is further elaborated in GSTA TPP 077 accordingly: If the nature and fundamental design of a vehicle used as a rally or racing car, including any modifications or add-ons, makes it of a class of vehicle suitable and capable of being registered for use on public roads, anywhere in the world, it is a 'car' as defined.... For example, where a standard passenger car is modified for rallying or racing and the modifications do not extend to changing its fundamental design, it will remain a car. If the rally car or racing car, including any modifications or add-ons, is of a class of vehicle designed to be used only on racing or rally circuits or off-road, and is not capable of being registered for use on public roads, it is not a 'car' as defined.... For example, where a racing car is designed and built from the ground up, or a standard passenger car is redesigned, stripped and rebuilt so that nature and fundamental design of the vehicle makes it incapable of being registered for use on public roads, it is not a 'car' as defined. Is the Race Car a 'road vehicle'? The construction and modifications made to the Race Car are racing-focussed and significantly alter the nature and fundamental design of the vehicle. The Race Car also has various features and components of a racing vehicle that would not be found on a typical car able to be driven on public roads and is not capable of being registered for use on public roads. Accordingly, the Race Car falls within the class of vehicle designed to be used only on racing or rally circuits, or off-road. Therefore, the Race Car is not a 'road vehicle', and hence not a 'car' under section 995-1 of the ITAA Act and, as such, the entitlement to input tax credits not subject to the car limit.

This ruling applies for the following period periods :