GST and charities: calculating the consideration provided to acquire an asset that is subsequently sold as a GST-free supply

Can the entity, a charitable institution, include the cost of stamp duty, motor vehicle registration and compulsory third party insurance when calculating the consideration it provided for the acquisition of a motor vehicle for the purposes of subparagraph 38-250(2)(b)(ii) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

No, the entity cannot include the cost of stamp duty, motor vehicle registration and compulsory third party insurance when calculating the consideration it provided for the acquisition of a motor vehicle for the purposes of subparagraph 38-250(2)(b)(ii) of the GST Act, as these costs do not form part of the consideration that was provided for the acquisition of the motor vehicle.

The entity is a charitable institution. The entity is trading in a motor vehicle.

When the entity purchased the motor vehicle, which it is now trading in, the entity paid an amount that covered: • the motor vehicle • dealer delivery • accessories • compulsory third party (CTP) insurance premium • motor vehicle registration, and • stamp duty on the contract to purchase the car.

The supply of the vehicle to the entity was a taxable supply. The entity is registered for goods and services tax (GST).

Subparagraph 38-250(2)(b)(ii) of the GST Act provides that a supply (other than a supply of accommodation) is GST-free if the supply is for consideration that is less than 75% of the consideration the supplier provided, or was liable to provide, for acquiring the thing supplied.

Section 9-15 of the GST Act provides that consideration includes any payment, act or forbearance, in connection with, in response to or for the inducement of a supply of anything. When the entity purchased the motor vehicle that it is now trading in, the entity paid an amount that covered: • the motor vehicle • dealer delivery • accessories • CTP insurance premium • motor vehicle registration, and • stamp duty on the contract to purchase the car.

The amount paid for the motor vehicle, accessories and dealer delivery was made in connection with the acquisition of the motor vehicle from the dealer. As such, it is consideration for the acquisition of the motor vehicle.

However, the payments for the motor vehicle registration and CTP insurance were not made in connection with the supply of the vehicle by the car dealer. Motor vehicle registration is connected to the supply of registration by the relevant transport authority and the CTP insurance premium is connected with a supply of insurance by the relevant insurer. Therefore, these payments are not consideration for the supply of the motor vehicle.

The payment for stamp duty is also not consideration for the supply of the motor vehicle by the dealer. Subsection 81-5(2) of the GST Act provides that the payment of an Australian tax, fee or charge that is specified in a written determination of the Treasurer, it is not the provision of consideration. Stamp duty is specified in the Treasurer's Determination and as such is not the provision of consideration.

In collecting the payments for motor vehicle registration, CTP insurance and stamp duty, the car dealer was acting as an agent for the entity.

Accordingly, the entity cannot include the cost of motor vehicle registration, CTP insurance and stamp duty when calculating the consideration it provided for the acquisition of a motor vehicle for the purposes of subparagraph 38-250(2)(b)(ii) of the GST Act, as these costs do not form part of the consideration that was provided for the acquisition of the motor vehicle. Note: The price (that is, the GST inclusive amount) of the motor vehicle, dealer delivery and accessories is used when calculating the consideration provided by the entity for the acquisition of the motor vehicle.