Private ruling: Entitlement to GST credits
Date of advice: 15 July 2016
Published: August 2016

Ruling: Q1: Are you entitled to claim goods and services tax (GST) credits in relation to your intended purchase of land? | A1: No, you are not entitled to claim the GST credits in relation to your intended purchase of land because you are not currently registered nor required to be registered for GST.

Relevant facts and circumstances: You are a non-profit entity which is registered as a charity with the Australian Charities and Not-for-profit Commission (ACNC) and you are endorsed by the ATO to access certain tax concessions. You are not currently registered for GST and you advised that your annual turnover is not more than $100,000. You are currently in negotiations to purchase a vacant block of land for consideration. A building will be constructed on the land for use by your organisation. You provided an unexecuted contract of sale (Contract) for your intended purchase which lists you as the purchaser and contains, among other things, that the price is 'Plus GST' and the margin scheme will not be used to calculate the GST.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 Section 9-15 | A New Tax System (Goods and Services Tax) Act 1999 Section 9-20 | 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

Reasons for decision: Summary: Based on the information provided, you are not entitled to claim the GST credits in relation to your intended purchase of land because not all of the requirements of section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. That is, you are not currently registered nor required to be registered for GST. | Detailed Reasoning - Detailed Reasoning: Under section 11-20 of the GST Act, you are entitled to GST credits for any creditable acquisition that you make. Section 11-5 of the GST Act provides that you make a creditable acquisition if all of the following requirements are satisfied: • you acquire anything solely or partly for a creditable purpose • the supply of the thing to you is a taxable supply • you provide, or are liable to provide, consideration for the supply, and • you are registered, or required to be registered for GST. In this case, you are acquiring a vacant block to land and therefore, it needs to be determined if each of these requirements will be satisfied in respect of this purchase. Section 11-15 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 but not to the extent that the acquisition is of a private or domestic nature or relates to making supplies that would be input taxed. Paragraph 9-20(1)(e) of the GST Act defines an enterprise to include an activity or series of activities done by a charity. You are a charity registered with the ACNC and endorsed by the ATO to access certain tax concessions. In this regard, we consider that your intended purchase of the land would be acquired in carrying on your enterprise as a charity. As such, this requirement is satisfied. Section 9-5 of the GST Act provides that a supplier, in this case, the Vendor, makes a taxable supply if certain requirements are satisfied. The facts show that the purchase price of the land will be 'Plus GST' and that you and the Vendor have agreed not to use the margin scheme to calculate the amount of GST on the sale of the land. In addition, there is no evidence to suggest that the Vendor will not be making a taxable supply in respect of the sale of the land to you. Therefore, the supply of the land to you will be a taxable supply. Subsection 9-15(1) of the GST Act defines consideration to include any payment or any forbearance in connection with a supply of anything and any payment in response to or for the inducement of a supply of anything. You advised that your intended purchase of the land will be for consideration. As such, this requirement will be satisfied. An entity that is carrying on an enterprise is required to be registered for GST if its turnover meets the registration turnover threshold. For a non-profit entity, the registration turnover threshold is $150,000. You are not currently registered for GST and you have advised that your annual turnover is not more than $100,000. As your annual turnover is below the registration turnover threshold of $150,000 for a non-profit entity, you are not required to be registered for GST. In this regard, we consider that this requirement is not satisfied as you are neither registered nor required to be registered for GST. Consequently, as you have not satisfied all of the requirements under section 11-5 of the GST Act, you will not be making a creditable acquisition with your intended purchase of the vacant block of land. Therefore, you will not be entitled to claim any GST credits in relation to this purchase nor will you be entitled to claim any GST credits included in any future development costs.