Private ruling: GST and reclaiming GST credits on the acquisition of a motor vehicle
Published: February 2012

Ruling: Q1: Can Entity A make an adjustment for GST on a motor vehicle purchased, where the ATO has adjusted the GST claim upon deregistration, and Entity A has subsequently reregistered for GST, provided that the adjustment made is in line with the methodology that the ATO used to adjust the claim? | A1: No, Entity A is not entitled to make an adjustment for GST on a motor vehicle purchased, where the ATO has adjusted the GST claim upon deregistration, and Entity A has subsequently reregistered for GST.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Entity A carried on a business of installing and repairing roller doors and was registered for GST. Entity A was involved in a motor vehicle accident in which it sustained a number of injuries. Post the accident, Entity A purchased a new motor vehicle for work and attempted to continue working in its business. Entity A claimed the GST it paid on the purchase of the motor vehicle at item 1B in its business activity statement. After carrying on its business for a few months, Entity A decided it could no longer carry on its business due to health reasons and cancelled its GST registration with the ATO. Entity A underwent an ATO review as a result of which the ATO made an increasing adjustment in relation to the said motor vehicle in accordance with section 138-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and accordingly, label 1A of its activity statement was increased by the relevant amount. Subsequently Entity A reregistered for a new business which it operated as a sole trader with no employees. Entity A used the said motor vehicle 98% for its business use, owned no other motor vehicles but had access to its partner's vehicle for private use. Entity A sought to reclaim the previously repaid GST credits in relation to the said motor vehicle when it reregistered for GST on commencing its new business.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 sections 11-5 | A New Tax System (Goods and Services Tax) Act 1999 subsections 11-10(1) and (2) | A New Tax System (Goods and Services Tax) Act 1999 subsections 11-15(1) and (2) | A New Tax System (Goods and Services Tax) Act 1999 subsection 138-5(1)

Reasons for decision: Summary: Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you are entitled to a GST credit on any creditable acquisition that you make. Section 11-5 of the GST Act provides that you make a creditable acquisition if: · you acquire a thing solely or partly for a creditable purpose · the supply of the thing to you is a taxable supply · you provide, or are liable to provide, consideration for the supply, and · you are registered or required to be registered for GST. Subsection 11-10(1) of the GST Act provides that an acquisition is any form of acquisition whatsoever. Subsection 11-10(2) provides that, without limiting subsection 11-10(1) of the GST Act, an acquisition includes, among other things, an acquisition of goods. An acquisition of goods usually occurs when there is a transfer of ownership of goods. Subsection 11-15(1) of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise or business. However, subsection 11-15(2) of the GST Act provides that you do not acquire the thing for a creditable purpose to the extent that the acquisition is of a private or domestic nature. Entity A acquired a motor vehicle and used it in carrying on its business of installing and repairing roller doors. As such, the motor vehicle was acquired for a creditable purpose and the acquisition was a creditable acquisition as at the date of acquisition. Entity A was entitled to and claimed the relevant GST credits on the acquisition of the motor vehicle. When Entity A cancelled its GST registration, subsection 138-5(1) of the GST Act was applicable to its assets (including the motor vehicle) immediately before the cancellation took effect. Accordingly, it had an increasing adjustment in respect of the motor vehicle in accordance with subsection 138-5(1) of the GST Act. Subsequently Entity A reregistered for GST as a sole trader. Entity A had the said motor vehicle in its possession at the date of its reregistration. Entity A did not acquire or reacquire the motor vehicle when it reregistered for GST. Accordingly, it did not make a creditable acquisition of the motor vehicle under section 11-5 of the GST Act when it reregistered for GST. This is because it had already acquired the motor vehicle on the date of purchase and had continued to own it since then. As such, Entity A was not entitled to reclaim the previously repaid GST credits in relation to the motor vehicle on its reregistration for GST as it did not make an acquisition of the motor vehicle on that date.

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.