Private ruling: GST and input tax credits
Date of advice: 25 January 2024
Published: 11 March 2024
Date scheme commenced: The date of issue of this notice of private ruling.

Ruling: Q1: Are the Services acquired for which the payments are consideration, made for a creditable purpose and, therefore, is the GST incurred on the payments recoverable in full as an input tax credit under s11-5 of the GST Act? | A1: Yes.

Relevant facts and circumstances: The Project provides an opportunity for the successful proponent to work with the State to deliver a housing project. The State has entered into a Project Deed, under which an entity has agreed to undertake the Project which will include the construction, operation and maintenance of the housing. In exchange for undertaking or procuring the operation and maintenance of the housing for the duration of the operational phase, the State will make payments under the terms of the Project Deed. Services are defined in the Project Deed. The Project Deed states the payments are consideration for the Services. For the purposes of constructing, operating and maintaining the housing, ground leases will be granted by the State.

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: Under section 11-20 of the GST Act, you are entitled to an input tax credit for any creditable acquisition that you make. Section 11-5 of the GST Act provides that you make a creditable acquisition if: (a) you acquire anything solely or partly for a creditable purpose, (b) the supply of the thing to you is a taxable supply, (c) you provide, or are liable to provide, consideration for the supply, and (d) you are registered or required to be registered for GST. Under subsection 11-15(1) of the GST Act you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, under subsection 11-15(2) of the GST Act you do not acquire the thing 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. The payments do not commence until the operational phase and are solely in regard to the Services and not in connection with the delivery of the development activities. The payments have a more proximate connection with the performance of obligations under the Project Agreements and are consideration for a separate supply made to the State (which will be a taxable supply if all the requirements in section 9-5 of the GST Act are met). Based on the facts, the payments are not third party consideration for the supply of residential accommodation or affordable housing/private housing to tenants. As such, the State is making a creditable acquisition when it acquires the Services for which the payments are consideration.