GST and attribution of input tax credit to the tax period in which the payment provided is the return of a 'core deposit'

Under subsection 29-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), does the entity, a supplier of reconditioned motor vehicle parts, attribute the input tax credit for its acquisition of a used motor vehicle part to the tax period in which it purchases that part when the payment provided by the entity is the return of an amount called a 'core deposit'?

Yes, under section 29-10(1) of the GST Act, the entity attributes the input tax credit for its acquisition of a used motor vehicle part to the tax period in which it purchases that part and provides payment by returning an amount called a 'core deposit'.

The entity is a supplier of reconditioned motor vehicle parts. The entity originally supplied a reconditioned motor vehicle part to a customer to replace the customer's broken motor vehicle part. The price of that taxable supply included an amount called a 'core deposit'.

The 'core deposit' is an amount that the entity agreed to repay the customer if the customer supplied the entity with their used motor vehicle part. If the customer did not supply their used motor vehicle part to the entity, the entity would retain the core deposit. The customer was under no obligation to supply their used motor vehicle part to the entity. Division 99 of the GST Act that applies to deposits held as security does not apply to the 'core deposit'.

The customer supplied their used motor vehicle part to the entity. The customer's supply was a taxable supply under section 9-5 of the GST Act and occurred in a later tax period to the entity's original supply. The entity paid the customer the amount of the 'core deposit'. The amount of the 'core deposit' is less than $55. The customer does not issue a tax invoice.

The entity is registered for goods and services tax (GST) and accounts for GST on a non-cash basis. The entity's acquisition of the used motor vehicle part was a creditable acquisition.

Under subsection 29-10(1) of the GST Act, an entity that accounts for GST on a non-cash basis attributes an input tax credit for a creditable acquisition to: the tax period in which it provides any of the consideration for the acquisition; or if, before it provides any of the consideration, an invoice is issued relating to the acquisition - the tax period in which the invoice is issued.

The entity pays the customer the amount of the 'core deposit' in the tax period in which it purchases the used motor vehicle part. Accordingly, under subsection 29-10(1) of the GST Act, the entity is entitled to attribute the input tax credit to the tax period it which it purchases the used motor vehicle part.

Under subsection 29-10(3) of the GST Act, if an entity does not hold a tax invoice for an acquisition when it submits a GST return for that tax period, the input tax credit for that acquisition is not attributable to that tax period. However, under subsection 29-80(1) of the GST Act, a tax invoice is not required for a taxable supply the value of which does not exceed $50 (that is, the GST-inclusive price does not exceed $55).

The amount of the 'core deposit' that the entity pays the customer for the used motor vehicle part represents the price for the motor vehicle part. This is less than $55. In accordance with subsection 29-80(1) of the GST Act, the entity does not require a tax invoice. As such, subsection 29-10(3) of the GST Act does not apply.

Therefore, under subsection 29-10(1) of the GST Act, the entity attributes the input tax credit for its acquisition of a used motor vehicle part to the tax period in which it purchases the part and provides payment by returning an amount called a 'core deposit'.

Note 1: If the value of the supply by the customer is more than $50 (that is the GST-inclusive price exceeds $55), the entity is required to hold a tax invoice when it submits a GST return for the tax period in which the input tax credit is attributable.