Private ruling: Goods and Services Tax and the sale of Assets
Date of advice: 12 October 2017
Published: March 2018

Ruling: Q1: Is Entity A entitled to claim an input tax credit in relation to the GST included in the consideration provided to the Vendor for its acquisition of Assets? | A1: Yes, Entity A is entitled to claim an input tax credit in relation to the GST included in the consideration provided to the Vendor for its acquisition of Assets to the extent that the acquisition of the Assets does not relate to making of supplies by Entity A that would be input taxed.

Relevant facts and circumstances: The Vendor supplied Assets to Entity A pursuant to a Sales and Purchase Agreement (SPA). Entity A applies the Assets to the operation of its enterprise. The Vendor issued a tax invoice to Entity A which provided consideration to the Vendor in accordance with the SPA and the Tax Invoice. The Vendor treated the supply of the Assets to Entity A as a taxable supply for GST purposes.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 ● Section 11-5 | ● Section 11-20

Reasons for decision: Summary: Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 provides that you are entitled to GST credits for any creditable acquisition you make. Section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states: '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.' From the facts provided, subsections 11-5(b) and (d) of the GST Act are satisfied. Therefore, we must consider whether pursuant to subsection 11-5 (a) and (c) of the GST Act your acquisitions are acquired for a creditable purpose. Section 11-15 of the GST Act states: (1) You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. (2) However, you do not acquire the thing for a creditable purpose to the extent that: (a) the acquisition relates to making supplies that would be input taxed; or (b) the acquisition is of a private or domestic nature. At the time of entering into the SPA, Entity A is the recipient of the Vendor’s supply of the Assets. There is a Tax Invoice issued by the Vendor in relation to its supply of the Assets. The acquisition of these assets by Entity A is made in carrying on its enterprise and therefore is for a creditable purpose and is not of a private or domestic nature. As such subsection 11-5(a) of the GST Act is met to the extent that the acquisitions of the Assets do not relate to the making of supplies by Entity A that would be input taxed. Subsection 11-5(c) of the GST Act requires that you provide, or are liable to provide consideration for the supply. Entity A was issued a Tax Invoice by the Vendor and therefore is liable to provide consideration for its acquisition of the Assets. Given the above, we are satisfied that subsection 11-5(c) of the GST Act is met. Therefore, Entity A is entitled to claim an input tax credit in relation to the GST included in the consideration provided to the Vendor for its acquisition of the Assets to the extent that the acquisition does not relate to making of supplies by Entity A that would be input taxed.