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Yes, you are allowed to claim input tax credits for second-hand goods you hold at the start of 1 July 2000 for the purposes of sale or exchange (but not manufacture) in the ordinary course of business, subject to certain requirements explained in paragraph 3.

From the start of 1 July 2000 Subdivision 66-A of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) allows you to claim input tax credits for second-hand goods that are acquired from 1 July 2000 for the purposes of sale or exchange (but not manufacture) in the ordinary course of business, subject to the exclusions outlined in subsection 66-5(2).

Section 18 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act) extends the operation of Subdivision 66-A to allow an input tax credit for second-hand goods you acquire before 1 July 2000 that you hold on 1 July 2000 for the purposes of sale or exchange (but not manufacture) in the ordinary course of business which would otherwise be excluded by subsection 66-5(2) of the GST Act. However, this section will not apply to second-hand goods which you have held for any other purpose, or in respect of which you are entitled to a special credit under section 16 of the Transition Act.

The term second-hand goods means those goods that are previously used or not new (see Goods and Services Tax Ruling GSTR 2000/8 at paragraphs 57-69). Where new goods are incorporated into second-hand goods they are no longer identifiable in themselves. They form part of, or are subsumed into, the second-hand goods.

The input tax credit available to you under Subdivision 66-A will include goods (either new or second-hand) you have incorporated into the second-hand goods (other than imported second-hand goods where you are entitled to the special credit under section 16 of the Transition Act) where: • you acquired the second-hand goods prior to 1 July 2000; and • you incorporated goods (either new or second-hand) into the second-hand goods prior to 1 July 2000; and • you held the second-hand goods (with the goods incorporated) on 1 July 2000 for the purposes of sale or exchange (but not manufacture) in the ordinary course of your business; and • the second-hand goods have not been previously held for any other purpose by you.

The consideration provided, or required to be provided, for the acquisition of the second-hand goods and the goods (either new or second-hand) incorporated into the second-hand goods will be the invoiced cost of those goods to you. Consideration for the goods (either new or second-hand) incorporated will include any associated related external costs for the acquisition of those goods (for example, the invoiced labour cost of installation of a gearbox into a second-hand vehicle).

The consideration for the second-hand goods held at the start of 1 July 2000 will be the sum of the consideration for the acquisition of the second-hand goods and the consideration for the goods (either new or second-hand) incorporated.

Where the requirements of Subdivision 66-A are satisfied the input tax credit is calculated as follows: • If the consideration is more than $300 the input tax credit is equal to the lesser of: - 1/11th of the consideration provided, or liable to be provided, for the acquisition; or - the amount of the GST payable on the subsequent supply of the second-hand good. • If the consideration is $300 or less the input tax credit is equal to: - 1/11th of the consideration provided, or liable to be provided, for the acquisition.

If you are entitled to an input tax credit for an acquisition of second-hand goods because of section 18 of the Transition Act, the input tax credit will be available on the combined consideration for the acquisition of both the second-hand goods and the goods (either new or second-hand) that have been incorporated prior to 1 July 2000 into the second-hand goods.

Where the combined consideration for the acquisitions was $300 or less the input tax credit is treated as though it were an input tax credit attributable to any one tax period of your choice.

Where the combined consideration for the acquisitions was more than $300 and you account on a cash basis, then the input tax credit is attributable to: • if, in a tax period, all the consideration is received for the subsequent taxable supply - that tax period; or • if, in a tax period, part of the consideration is received - that tax period, but only to the extent that the consideration is received in that tax period; or • if, in a tax period, none of the consideration is received - none to that tax period.

Where the combined consideration for the acquisitions was more than $300 and you do not account on a cash basis, then the input tax credit is attributable to: • the tax period in which any consideration is received for the subsequent taxable supply of the goods; or • if, before any of the consideration is received you have issued an invoice relating to the supply - the tax period in which the invoice is issued.