GST and entitlement to input tax credits (acquisitions relate to input taxed supplies)

Is the entity, a business operator, entitled to input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for goods and services that it acquires in the course of making input taxed supplies where the entity does not carry on any enterprise outside Australia and the input taxed supplies are not financial supplies?

No, the entity is not entitled to input tax credits under section 11-20 of the GST Act for goods and services that it acquires in the course of making input taxed supplies where the entity does not carry on any enterprise outside Australia and the input taxed supplies are not financial supplies.

The entity is a business operator in Australia. The entity does not carry on any enterprise outside Australia. The entity makes input taxed supplies that are not financial supplies. The entity acquires goods and services in the course of making these input taxed supplies.

The entity is registered for goods and services tax (GST).

Section 11-20 of the GST Act provides that an entity is entitled to the input tax credit for any creditable acquisition that it makes.

Section 11-5 of the GST Act lists the requirements that must be satisfied for an entity to make a creditable acquisition. One of the requirements is that the entity must make the acquisition solely or partly for a creditable purpose (paragraph 11-5(a) of the GST Act).

Section 11-15 of the GST Act defines the meaning of creditable purpose. Paragraph 11-15(2)(a) of the GST Act provides that an entity does not make an acquisition for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed.

However, for the purposes of paragraph 11-15(2)(a) of the GST Act, an acquisition is not treated as relating to making supplies that would be input taxed if the acquisition relates to an input taxed supply: • that is made through an enterprise, or part of an enterprise that the entity carries on outside Australia (subsection 11-15(3) of the GST Act); • that is a financial supply and the entity does not exceed the financial acquisition threshold (subsection 11-15(4) of the GST Act); or • that consists of a borrowing (a financial supply) and the borrowing relates to other supplies that the entity makes that are not input-taxed (subsection 11-15(5) of the GST Act).

The entity does not carry on any enterprise outside Australia and the acquisitions that the entity makes do not relate to making financial supplies. Therefore, subsections 11-15(3) to 11-15(5) of the GST Act do not apply. The acquisitions relates to making supplies that would be input taxed supplies and, under paragraph 11-15(2)(a) of the GST Act, are not for a creditable purpose. History: Paragraph amended on 9 May 2005 to amend reference to subsection '11-5(3)' to subsection 11-15(3).

The acquisitions are not creditable acquisitions under section 11-5 of the GST Act as they are not for a creditable purpose. Therefore, the entity is not entitled to input tax credits under section 11-20 of the GST Act for goods and services that it acquires in the course of making input taxed supplies where the entity does not carry on any enterprise outside Australia and the input taxed supplies are not financial supplies.