GST and entitlement to input tax credits for acquisitions from unregistered suppliers

Is the entity, a business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for an acquisition made from a supplier when the supplier quotes its Australian Business Number (ABN) on the invoice but the supplier is not registered, or required to be registered, for goods and services tax (GST)?

No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act, for an acquisition made from a supplier when the supplier quotes its ABN on the invoice but the supplier is not registered, or required to be registered, for GST.

The entity is a business operator. The entity made an acquisition from a supplier. The supplier provided the entity with an invoice that quoted the supplier's ABN. However, the supplier is neither registered nor required to be registered for GST.

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

Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if: (a) it acquires anything solely or partly for a creditable purpose; and (b) the supply of the thing to it is a taxable supply; and (c) it provides, or is liable to provide, consideration for the supply, and (d) it is registered or required to be registered for GST.

Paragraph 11-5(b) of the GST Act requires the supply of the thing to the entity to be a taxable supply. Section 9-5 of the GST Act sets out the requirements for a taxable supply. One of these requirements is that the supplier is registered or required to be registered for GST (paragraph 9-5(d) of the GST Act).

The supplier has provided the entity with an invoice that quotes its ABN. However, an entity can have an ABN and not be registered for GST. An ABN is not evidence that an entity is registered for GST.

Although the supplier has an ABN, the supplier is not registered or required to be registered for GST. Therefore, its supply to the entity cannot be a taxable supply.

As such, the entity is not making a creditable acquisition and is not entitled to an input tax credit under section 11-20 of the GST Act for an acquisition made from a supplier when the supplier quotes its ABN on the invoice but the supplier is not registered, or required to be registered, for GST.

[Note 1: Before an entity can claim an input tax credit on an acquisition it makes, it must hold a tax invoice for the supply (subsection 29-10(3) of the GST Act). One of the requirements of a tax invoice is that it identifies that GST is included in the price of the supply (subsection 29-70(1) of the GST Act and regulation 29-70.01 of the A New Tax System (Goods and Services Tax) Regulations 1999)

Note 2: Where an entity has incorrectly claimed an input tax credit on its Business Activity Statement, it will need to correct the error. Information on correcting errors is available in the fact sheet Correcting GST Mistakes .

Note 3: Information on whether an entity is registered for GST can be obtained from the Australian Business Register at www.abr.gov.au.

Note 4: There may be an exception to the rules set out in this decision where the goods acquired from the unregistered supplier are second hand goods, which are acquired for re-sale. Division 66 of the GST Act allows input tax credits to be claimed in limited circumstances where second hand goods are acquired from unregistered suppliers. Refer to ATO ID 2002/27.]