Private ruling: GST and entitlement to GST credits
Date of advice: 14 March 2019
Published: May 2019

Ruling: Q1: Are you entitled to claim back the GST paid on the repairs and racing of the Vessel owned by company A under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No, you are not entitled to claim back the GST paid on the repairs and racing of the Vessel owned by company A under section 11-20 of the GST Act because you have not made a creditable acquisition of these expenses under section 11-5 of the GST Act. Further you cannot claim a refund of the GST paid on the repairs and racing of the Vessel under section 57-10 of the GST Act as you are not registered for GST and company A is not registered and was not required to be registered for GST when you acquired the expenses on its behalf. | Q2: Can company A claim back the GST paid on the repairs and racing of its vessels in Australia when the expenses for the repairs and racing were acquired through you? | A2: No, company A cannot claim back the GST paid on the repairs and racing of its vessels in Australia under section 11-20 of the GST Act because it is not registered and was not required to be registered for GST when the expenses for the repairs and racing were acquired through you and therefore has not made a creditable acquisition of the expenses under section 11-5 of the GST Act. Facts Company A is a company registered outside Australia. It is not registered for GST. It owns a vessel and the purpose of owning the vessel is mainly to participate in racing events all over the world with a managing overseas partner company B. There is no written agreement between the two parties regarding the arrangement for participating in the races. During the racing period, each party carried on its activity in its own right. Company A and B are not related to each other. Under the arrangement company A provided the vessel, and paid or reimbursed the expenses related to the vessel. Company B was responsible for the expenses related to the race and supplied sponsorship to an overseas company. Payment of the sponsorship was made directly to company B. Company A did not receive any income from company B. Company A has brought the vessel to Australia in order to participate in Australian racing events. In one of the racing events the vessel was seriously damaged and had repairs done in Australia. You and another related Australian company Ausco have received written authorisation from company A to act on its behalf for all matters relating to the management and repair services of the vessel in Australia. This authority has now ceased. After the repair of the vessel was completed, the vessel started to join some racing event onward. When the vessel was in Australia, company A did not carry on any business activity in Australia. There was no income received from Australia during that period During the repair and racing period, you and Ausco paid the related expenses to the Australian service providers on behalf of company A. The tax invoices from these providers included GST. Company A has reimbursed in full all the expenses incurred by AUSco and you. AUSco and you paid the racing events travel and accommodation expenses of the crew members which company B. was liable for. Company B has reimbursed you and AUSco all the paid racing events travel and accommodation expenses. You and AUSco have not claimed any GST credit or recorded the expenses as an income tax deduction. During the repair and racing period, the vessel did not involve any income earning activity and did not make any commercial operation. You and AUSco did not have any business plan to use the vessel for any commercial activity. Company A printed some adverting logos of one of its related companies on the vessel at its own cost and have these advertisements placed on the hull of the vessel. Company A did not receive any payment for this supply from the related company. When the vessel was in Australia, company A did not carry on any business activity in Australia and did not receive any income while in Australia. The vessel was shipped out from Australia lately.


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 11-20 | A New Tax System (Goods and Services Tax) Act 1999 section 57-10

Reasons for decision: Summary: Under section 11-20 of the GST Act you are entitled to the input tax credit for any creditable acquisition that you make. Under section 11-5 of the GST Act 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 able 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. From the information given, you do not own the vessel and therefore the repair and racing expenses were not acquired for your business purposes. You therefore did not acquire the repair and racing expenses for a creditable purpose under subsection 11-15(1) of the GST Act. Paragraph 11-5(a) of the GST Act is not satisfied. Further you are not registered for GST. Paragraph 11-5(d) of the GST Act is not satisfied. Accordingly, you have not made a creditable acquisition under 11-5 of the GST Act and therefore are not entitled to claim the GST paid on these expenses under section 11-20 of the GST Act. The expenses related to the vessel are for company A on whose behalf you have been authorised to incur them. In this instance it will be relevant to consider section 57-10 of the GST Act in the event you decide to register and backdate your GST registration. Under subsection 57-10(1) of the GST Act, if a non-resident makes a creditable acquisition through a resident agent, the agent and not the non-resident is entitled to the input tax credit on the creditable acquisition. A credit entitlement exists only if the non-resident makes a creditable acquisition through the agent. That is the non-resident must satisfy the requirements of section 11-5 of the GST Act. One of the requirement in section 11-5 of the GST Act is the entity is registered or required to be registered for GST. From the facts given, company A is not registered for GST. We will now determine if company A was required to be registered for GST when you acquired the expenses on its behalf. Under section 23-5 of the GST Act you are required to register for GST if you are carrying on a business and your annual turnover meets the GST registration threshold of A$75,000 or more. From the facts given, company A did not carry any business activity in Australia and did not receive any income when the vessel was in Australia. In this instance company A was and is not required to be registered for GST when you acquired the expenses on its behalf. In this instance paragraph 11-5(d) of the GST Act is not satisfied. Accordingly, company A has not made a creditable acquisition under section 11-5 of the GST Act for the expenses acquired through you. You therefore are not entitled to claim a refund of the GST paid on the repairs and racing of the vessel under subsection 57-10(1) of the GST Act in the event you decide to register and backdate your GST registration. Under section 11-20 of the GST Act an entity is entitled to the input tax credit for any creditable acquisition that it makes under section 11-5 of the GST Act. One of the requirements in section 11-5 of the GST Act is the entity is registered or required to be registered for GST. From the facts given, company A is not registered and was not required to be registered for GST at the time these expenses were incurred through you. Paragraph 11-5(d) of the GST Act is not satisfied. In this instance company A has not made a creditable acquisition under section 11-5 of the GST Act for the expenses acquired through you. Company A is not entitled to a GST refund for the expenses that it has acquired through you under section 11-20 of the GST Act.

Relevant Facts: You carry on your business activity in Australia and are not registered for GST. | Reasons for decision: Note : Where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in section 195-1 of the GST Act.