Private ruling: Input tax credits for training costs
Published: May 2012

Ruling: Q1: Are you entitled to claim input tax credits or reduced input tax credits on costs associated with providing training to your current and/or future staff? Advice/Answers You are entitled to claim input tax credits associated with providing training to your current and/or future staff to the extent that they relate to receiving the government grants that you receive. If any of the acquisitions do not relate to receipt of the government grants then you are not entitled to claim any input tax credits or reduced input tax credits.

Relevant facts and circumstances: You are an entity that makes financial services. You are a registered training organisation. You incur expenses in providing training to both your current and future employees. These expenses can be anything from travel costs, accommodation costs, and administration expenses. You are able to identify the training costs under a separate cost category. In order to provide the above training, you receive funding from different government departments in the form of grants and some as non-grants. The government departments that provide you the funding have stipulated that those payments are subject to goods and services tax (GST). Accordingly, GST is included in the amounts paid to you. You have been remitting the GST payable on the funding that you receive. You do not pay GST on any of the other supplies that you make through your credit union business. They are input taxed financial supplies. You exceed the financial acquisition threshold.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 9-5, | A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 11-5 and | A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 11-15.

Reasons for decision: Summary: You are entitled to claim input tax credits on creditable acquisitions that you make. Therefore, what must be determined here is whether the acquisitions that you have made in providing the training services come within the meaning of creditable acquisitions. A creditable acquisition is defined in section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as follows: 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. (terms marked with asterisks (*) are defined in section 195-1 of the GST Act) We are of the view that the relevant acquisitions that you have queried meet paragraphs 11-5(b), 11-5(c) and 11-5(d) of the GST Act. For instance; The acquisitions that you have made were taxable supplies to you. · You are liable to provide consideration for the acquisitions that you make such as for travelling, accommodation, administration services and any other acquisition that you make in relation to providing the training courses. You may utilise the funding that you receive to pay for the relevant acquisitions. But, the funding, after you have received it is considered to be a part of your turnover. Accordingly, it is you that provides consideration for the acquisitions rather than the government body that provides you the funding. · you are registered for GST. What remains to be determined is whether you have made the relevant acquisitions for a creditable purpose (ie: whether paragraph 11-5(a) of the GST Act is satisfied). A creditable purpose is defined in section 11-15 of the GST Act as follows: You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise. However, 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. You have acquired the various things in providing training to your staff in the course of carrying on your enterprise. Therefore, the acquisitions meet subsection 11-15(1) of the GST Act. The next issue to determine is whether the acquisitions come under any of the provisions in subsection 11-15(2) of the GST Act. Paragraph 11-15(2)(a) of the GST Act provides that acquisitions that you make that relate to making a supply that would be input taxed are not considered to be made for a creditable purpose and consequently, the entity making that acquisition is not entitled to claim input tax credits on those acquisitions. Your enterprise comprises of making input taxed financial supplies and taxable supplies. The input taxed supplies are the financial supplies that you make in carrying out your credit union enterprise. You have advised us that you are required to pay GST on the funding that you receive. This means any supplies that you supply to receive the funding are taxable supplies. Generally, those supplies are obligations that you undertake in relation to receiving of the funding. An entry into an obligation is a supply for GST purposes. Accordingly, to the extent that the acquisitions that you make in providing your training relate to making your input taxed supplies of financial supplies, those acquisitions are not for a creditable purpose and are not creditable acquisitions. You are not entitled to claim input tax credits to the extent that the expenses relate to making those input taxed supplies. If any of your acquisitions are in relation to receiving the government funding, then those acquisitions are for a creditable purpose. Accordingly, you are entitled to claim input tax credits on such acquisitions. | Detailed Reasoning - Amount of input tax credits: If the relevant acquisitions relate to, both input taxed financial supplies and the receipt of government funds, then based on a fair and reasonable method of apportionment you need to determine the portion of your supplies that relate to the receipt of the government funds. The amount of input tax credits that you can claim would be 1/11 th of the relevant portion of the training expense that relates to the receipt of the government funds (provided you hold a valid tax invoice). In this regard, Goods and Services Tax Ruling Goods and services tax: determining the extent of creditable purpose for providers of financial supplies (GSTR 2006/3) provides the Commissioners' views on how to apportion your expenses to claim the relevant portion of your input tax credits. We have enclosed a copy of GSTR 2006/3 for your perusal. | Detailed Reasoning - Reduced input tax credits: You are generally not required to claim reduced input tax credits on the expenses that relate to the provision of training, as these acquisitions are not reduced credit acquisitions.

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.