Private ruling: GST and input tax credits
Published: July 2012

Ruling: Q1: Are you entitled to the input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for acquisitions that you made in relation to the purchase of the land, and the development and construction of the residential and commercial units located at a specified address? Advice/Answer Yes. You are entitled to the input tax credits under section 11-20 of the GST Act for acquisitions that you made in relation to the purchase of the land, and the development and construction of the residential and commercial units at the relevant property. This is provided the supply of the thing to you is a taxable supply and you provide, or are liable to provide, consideration for the supply. To attribute or claim the input tax credits you are required to hold a valid tax invoice and satisfy the 4 years time limit on entitlement to input tax credits.

Relevant facts and circumstances: You are an entity with a specific responsibility. You are registered for GST from 1 July 2000. You purchased the property located at the specified address in relation to your specific responsibility. Since purchasing the land, you have undertaken and almost completed a substantial high density development comprising residential dwellings and commercial units (the Properties). You proposed to transfer freehold title to the development including the residential dwellings and the commercial units to a separate entity, entity A. You have provided a copy of the draft agreement (the Agreements) that you propose to enter into with entity A.

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: Note: Unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Section 11-20 provides that you are entitled to the input tax credit for any creditable acquisition that you make. Under section 11-5 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. Subsection 11-15(1) states that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. Subsection 11-15(2) states that, 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. Based on the facts, we consider the relevant acquisitions would not be of a private or domestic nature. You carry on an enterprise in which you have a primary role of a specific responsibility. You acquired the land at the specific address for a purpose relating to your responsibility. You have since undertaken and almost completed development of a number of residential dwellings and commercial units. You propose to transfer freehold title to these newly completed properties to entity A. Entity A will hold and lease the Properties directly to eligible tenants subject to the terms and conditions of the Agreements. Therefore, you are not regarded as making any input tax supplies in relation to the Properties. When you transfer the newly completed residential dwellings and commercial units to entity A, the supply will also not be an input taxed supply for that transaction. Accordingly, we consider the acquisitions in relation to the land, development and construction are made in carrying on your specified enterprise, and the requirements of a creditable purpose in paragraph 11-5(a) will be satisfied. Also, subsection 11-15(2) will not apply to restrict the relevant acquisitions from being made for a creditable purpose. Therefore, as you are also registered for GST, you are entitled to the input tax credits under section 11-20 for acquisitions that you made in relation to the purchase of the land, and the development and construction at the specified address. This is provided the supply of the thing to you is a taxable supply and you provide, or are liable to provide, consideration for the supply. In attributing or claiming the input tax credits you are required to hold a valid tax invoice and satisfy the 4 years time limit on entitlement to input tax credits.

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.