Private ruling: GST and display home
Published: February 2013
Ruling period: 1 July 2011 to 30 June 2012

Ruling: Q1: Are you entitled to claim input tax credits for the furnishing and maintenance of a display home? | A1: Yes. You are entitled to claim input tax credits for the furnishing and maintenance of a display home.

Relevant facts and circumstances: · You are registered for goods and services tax (GST); · You carry on an enterprise of the design and construction of residential premises; · You built a residential property for Company X; · You then leased the residential property from Company X; · You have treated the construction of the residential property and the lease of the residential property, as input tax supplies; · You used the residential property wholly as a display home to carrying on your enterprise; · The display home is used to earn new building contracts · The lease from Company X does not include any furnishings; · You hire furnishings to furnish the display home; · You incurred maintenance expenses to maintain the display home.

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

Reasons for decision: Summary: You are entitled to claim input tax credits for the furnishing and the maintenance of a display home. | Detailed Reasoning - Detailed reasoning: Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when you acquire something that is used by you in the carrying on of your enterprise, you are entitled to claim an input tax credit for the GST component of that acquisition if it is a creditable acquisition. Under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), 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. Guidance on when an acquisition is made for a creditable purpose is provided in Goods and Services Tax Ruling GSTR 2008/1 (GSTR 2008/1). Relevantly, you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise (subsection 11-15(1)). However, you do not acquire a thing for a creditable purpose to the extent that the acquisition is of a private or domestic nature (paragraph 11-15(2)(b)). It is a question of fact and degree whether an acquisition is acquired in carrying on an enterprise (see paragraph 70 of GSTR 2008/1). | Detailed Reasoning - Furnishings: To determine whether you are entitled to claim input tax credits for the furnishing of a display home, you will need to consider whether the acquisitions were creditable in the first place (i.e. whether they were made in carrying on the enterprise, or whether the acquisitions were always intended for a private or domestic purpose). Based on the facts, the display home is used by you in carrying on your enterprise of the design and construction of residential premises. The use of the display home is to earn new building contracts. The furniture that you hired is solely used to furnish the display home. You have acquired the furniture and equipment for the purpose of carrying on your enterprise, and we consider that you satisfy the requirements at subsection 11-15(1) of the GST Act. As you are registered for GST, and you provided consideration for these acquisitions which were a taxable supply to you, you will satisfy all the requirements of section 11-5 of the GST Act. Therefore you are entitled to claim an input tax credit for the GST component of the furniture that you hired to furnish your display home. | Detailed Reasoning - Maintenance: Where the premise is used as a display home in the course or furtherance of an enterprise that makes taxable supplies, input tax credits can be claimed in respect of the running costs of the display home where they meet the requirements of a creditable acquisition under section 11-5 of the GST Act. If there is a change in the extent of creditable purpose, adjustments to the input tax credits may be necessary depending on the circumstances. As the maintenance costs are a creditable acquisition, and used for a creditable purpose, input tax credits will be available for the GST paid on the maintenance costs. You are entitled to claim input tax credits for the furnishing and the maintenance of a display home.

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.