Issue
Is the entity, a partnership, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when a partner in the partnership sells their personal motor vehicle, which was used partly for the partnership's business purposes?
Decision
No, the entity is not making a taxable supply under section 9-5 of the GST Act, when a partner in the partnership sells their personal motor vehicle, which was used partly for the partnership's business purposes.
It is the partner who is making the supply.
Facts
The entity is a partnership. A partner in the partnership sells their personal motor vehicle, which is used partly for partnership business purposes. The partner claimed income tax deductions, in their individual tax return, for the business use of the motor vehicle.
The motor vehicle is a personal asset of the partner. The partners do not intend that the motor vehicle become a partnership asset. It is not listed in the partnership records as a partnership asset.
The entity is registered for goods and services tax (GST). The partner is not registered, or required to be registered for GST.
Reasons for Decision
Under section 9-5 of the GST Act, an entity makes a taxable supply if: • it makes the supply for consideration; • it makes the supply in the course or furtherance of an enterprise that it carries on; • the supply is connected with Australia; and • it is registered, or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Before it can be determined whether the supply is a taxable supply, it must be established whether it is the partnership entity or the partner that is making the supply.
Under subsection 184-5(1) of the GST Act, a supply, acquisition or importation made by or on behalf of a partner of a partnership in their capacity as a partner: • is taken to be a supply, acquisition or importation made by the partnership; and • is not taken to be a supply, acquisition or importation made by that partner or any other partner of the partnership.
The motor vehicle is a personal asset of the partner. It is not listed in the partnership records as a partnership asset. The partner has claimed income tax deductions through their personal income tax return for the business use of the vehicle. These facts are evidence that the partners do not intend that the motor vehicle become a partnership asset.
As such, when the partner sells the motor vehicle, they are making the supply in their personal capacity, not in their capacity as a partner. Therefore, section 184-5(1) of the GST Act does not apply and the supply is not taken to be made by the entity.
As the partnership entity is not making the supply, it is not making a taxable supply under section 9-5 of the GST Act when a partner in the partnership sells their personal motor vehicle, which was used partly for partnership business purposes. [Note 1: As the supply is taken to be made by the partner, and the partner is not registered, or required to be registered for GST, the requirements of section 9-5 of the GST Act have not been met. Accordingly, the partner is not making a taxable supply under section 9-5 of the GST Act when they sell their personal motor vehicle, which was used partly for partnership business purposes. Note 2: Where a motor vehicle is sold, by or on behalf of a partner in a partnership in his or her capacity as a partner, the supply of the motor vehicle is taken to be a supply made by the partnership and not a supply made by that partner or any other partner of the partnership. The supply of a motor vehicle by the partnership is a taxable supply when the requirements of section 9-5 of the GST Act are satisfied.]