Private ruling: GST and entitlement to an input tax credit
Date of advice: 23 September 2019
Published: November 2019
Ruling period: September 2019 to September 2023

Ruling: Q1: Are you entitled to claim an input tax credit on your purchase of a childcare business? | A1: Yes. You are entitled to claim an input tax credit on your purchase of a childcare business because the acquisition is a creditable acquisition.

Relevant facts and circumstances: You acquired a childcare business from an entity. The supply of the business is a taxable supply.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 11-5

Reasons for decision: Summary: Relevant legislation Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if: (a) it acquires anything sole or partly for a creditable purpose (b) the supply of the thing to it is a taxable supply (c) it provides, or is liable to provide, consideration for the supply, and (d) it is registered, or required to be registered, for GST. Section 11-15 of the GST Act provides that an entity acquires a thing for a creditable purpose to the extent that it acquires it in carrying on an enterprise. However, an acquisition is not for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed or the acquisition is of a private or domestic nature. Application of the law to your case The supplies that a childcare business makes in carrying on its enterprise are not input taxed. As such, your acquisition of the childcare business is for a creditable purpose. As the acquisition satisfies all of the requirements of section 11-5 of the GST Act, you are entitled to claim an input tax credit on the purchase of the childcare business.