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The vendor and the purchaser are not dealing at arm's length. 2. The vendor makes a supply to the purchaser at a price that is not in keeping with the commercial value of the supply. 3. For GST purposes, the vendor is registered, accounts on a cash basis, and may have quarterly tax periods. (A vendor accounting for GST on a cash basis is only required to attribute GST to a tax period to the extent of the consideration received in the tax period). 4. For GST purposes, the purchaser is registered, accounts on a non-cash basis, and may have monthly tax periods. (A purchaser accounting for GST on a non-cash basis can claim the full input tax credit in the period in which any of the consideration is provided or an invoice is issued). 5. Under a typical agreement the vendor supplies an item to the purchaser for consideration that is inflated to a commercially unrealistic amount inclusive of GST, for example, $550,000. 6. The purchaser may be required to make an initial payment, for example, $1,000 with the balance to be paid in instalments. The payment schedule is structured so that the subsequent payments are spread over a number of years. 7. The purchaser claims the $50,000 input tax credit on the acquisition in the tax period in which the tax invoice is received. This will usually be in the tax period in which the agreement is made. 8. The vendor remits GST on the payment of $1,000 in the period it is received. The vendor is not required to account for the balance of the GST payable on the supply until the subsequent payments are received. 9. The purchaser claims refunds of input tax credits in a tax period much earlier than the GST is required to be paid by the vendor. 10. Often under these arrangements the vendor and the purchaser are related parties. 11. In some instances payments are never made and goods 'acquired' do not exist.