Private ruling: GST and input tax credits
Published: July 2013

Ruling: Q1: Can you claim GST input tax credits in relation to each of the initiatives provided as part of the Program in the 2013 FBT year? | A1: To the extent that you are either liable to pay or have paid consideration for the relevant acquisition you may claim an input tax credit apart from any acquisition made in relation to group exercise classes and registration fees to Fun Runs. | Q2: Can you claim GST input tax credits in relation to the gift cards associated with the Awards Program in the 2013 FBT year? | A2: Yes.

Relevant facts and circumstances: You are registered for GST. You believe it is important for workplaces to offer healthy lifestyle initiatives at work. You have status as income tax exempt. The Program The Program is an initiative, which focuses on the health and wellbeing of your employees. The Program is part of your internal employee program that comprises a range of employee-related initiatives. These initiatives include: · Group exercise classes · Registration (entrance) fees to Fun Runs · Neck and shoulder massages · Health coaching workshops Awards Program Your awards encourage and recognise both individual employee and team contributions to overall objectives. The Awards will ensure the outstanding work of employees is recognised and appreciated. Any employee or contract employee can nominate another employee or contract employee. These awards cannot be self-nominated. At the annual awards ceremony, winners are announced. Each winner will receive a framed certificate, recognition in a newsletter and a gift card.

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 11-20 | A New Tax System (Goods and Services Tax) Act 1999 section 69-5 | Income Tax Assessment Act 1997 Division 32 | Fringe Tax Benefits Assessment Act 1986 Division 58

Reasons for decision: Summary: You can claim GST input tax credits in relation to each of the initiatives provided as part of the Program (apart from any acquisition made in relation to group exercise classes and registration fees to Fun Runs) and the gift cards associated with the Awards in the 2013 FBT year where the supply acquired is a taxable supply and you have either paid or are liable to pay for the relevant acquisition. | Detailed Reasoning - Detailed reasoning: Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that an entity is entitled to the input for any creditable acquisitions it makes. Creditable acquisition is defined in section 11-5 of the 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. You have paid or are liable to pay either partly of fully for the acquisitions you make under the Program and Awards Program and are registered for GST, thus satisfying paragraphs (c) and (d) above. Whether your acquisition is the acquisition of a taxable supply will be matter for you to determine, in consultation with each supplier, at the time of supply. For the purposes of this ruling we will presume that all supplies you acquire will be taxable supplies (paragraph (b)). You will make an acquisition for a creditable purpose as per paragraph (a) above where the requirements of subsection 11-15(1) of the GST Act are met: (1) You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise. An employer acquires a thing for a creditable purpose if it makes the acquisition in carrying on an enterprise. If an employer acquires something to provide a fringe benefit, health and well being program, reward program or similar in respect of employment in their enterprise, they have acquired it in carrying on their enterprise and therefore acquired it for a creditable purpose. Therefore as your acquisitions in relation to the Program and the Awards program meet the requirements of paragraphs (a), (c) and (d) of section 11-20 of the GST Act and are presumed to meet the requirements of paragraph (b), you are entitled to claim the resultant input tax credits. It is noted that you will not pay and will not be liable to pay consideration for a component of acquisitions in all circumstances; at times employees will make contributions towards the acquisitions. You will not make creditable acquisitions for these components of these acquisitions as the requirements of paragraph 11-5(c) of the GST Act will only be met where you are the payer or the entity liable to pay. As you are aware, section 69-5 of the GST Act precludes certain acquisitions from being creditable acquisition on the basis that the acquisition is not creditable to the extent that it is a non-deductible expense. Subsection 69-5(3) of the GST Act lists various non-deductible expenses some of which relate to entertainment expenses as described in Division 32 of the Income Tax Assessment Act 1997 (ITAA 1997) . 'Entertainment' is defined in subsection 32-10(1) of the ITAA 1997 to mean: · entertainment by way of food, drink or recreation; or · accommodation or travel to do with providing entertainment by way of food, drink or recreation. 'Recreation' is defined in subsection 995-1(1) of the ITAA 1997 to include 'amusement, sport or similar leisure-time pursuits'. As part of the Program, an employee (or their associate) may attend a group exercise class, or participate in a fun run, both of which come within the definition of 'recreation' in subsection 995-1(1) of the ITAA 1997. Section 32-5 of the ITAA 1997 prevents an employer subject to income tax from claiming a deduction for the expenditure (assuming section 32-20 of the ITAA 1997 had not been enacted). While there are listed exceptions to section 32-5 of the ITAA 1997, these latter provisions do not apply in relation to either the group exercise classes or fun runs. Note that the issue as to whether entertainment expenses are non-deductible expenses turns on the effect of the phrase 'not deductible under Division 8 of the ITAA 1997 because of … (f) Division 32 of the ITAA 1997 (Entertainment expenses)' in subsection 69-5(3) of the GST Act. We take the view that the words 'under Division 8 of the ITAA 1997' are a reference to the general deductibility provisions of the ITAA 1997 rather than the particular circumstances of a taxpayer's case. This means that when section 69-5 of the GST Act refers to an expense being not deductible under Division 8 because of one of the specified statutory provisions, it is referring to the requirements specified in the statutory provision and not to whether the claimant for an input tax credit would have been entitled to a deduction for income tax but for the statutory provision. Subsection 69-5(4) of the GST Act states: (4) If the entity making the acquisition or importation is an *exempt entity, the acquisition or importation is a non-deductible expense if it would have been a non-deductible expense under subsection (3) or (3A) had the entity not been an exempt entity. We consider the reason subsection 69-5(4) of the GST Act was inserted into the GST Act was to make the position of exempt entities perfectly clear. The Explanatory Memorandum that accompanied the A New Tax System (Goods and Services Tax) Bill 1998 when it was introduced into the House of Representatives stated: 6.79 If you are exempt from income tax, an acquisition that you make that would be a non-deductible expense if the provisions of the Income Tax Assessment Acts that deny deductions applied to you, is not a creditable acquisition. Section 69-5 of the GST Act incorporates the income tax provisions into the GST Act only for the purpose of identifying non-deductible expenses which will not form part of a creditable acquisition or importation. As such section 32-5 of the ITAA 1997 prevents you from claiming a deduction for such entertainment expenditure under this provision . It follows that the corresponding input tax credits for Fun Run registration and exercise classes are not claimable under Division 69 of the GST Act.