Issue
Is the entity, a motor vehicle restorer, entitled to quote its Australian Business Number (ABN) under section 9-5 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), when the entity imports a luxury car to be restored and on sold to a customer?
Decision
Yes, the entity is entitled to quote its ABN under section 9-5 of the LCT Act, when the entity imports a luxury car to be restored and on sold to a customer.
Facts
The entity is a motor vehicle restorer. The entity is importing a car that is a luxury car within the meaning of subsection 25-1(1) of the LCT Act. The entity is importing the luxury car with the purpose of restoring it to an 'as new' condition and then on-selling it to a customer.
The entity's business involves the purchase from within Australia or importation of sports cars and classic cars. The entity restores these cars and then on-sells them to customers.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Paragraph 9-5(1)(a) of the LCT Act provides that an entity is entitled to quote their ABN in relation to a supply or importation of a luxury car if, at the time of quoting, the entity has the intention of holding the car as trading stock, other than holding it for hire or lease, and for no other purpose.
The entity is importing the luxury car with the purpose of restoring it to an 'as new' condition and then on-selling to a customer. Therefore, it needs to be determined whether the entity is holding the luxury car as trading stock.
The term 'trading stock' is not defined in the LCT Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The ordinary meaning of 'trading stock' includes not only goods held for the purpose of sale or exchange in the ordinary course of trade but also things such as materials which a manufacturer holds for use in manufacture.
Raw materials and work in progress of a manufacturer are also considered to be 'trading stock' as stated by Mason J in Federal Commissioner of Taxation v. St Hubert's Island Pty Ltd (in liq) (1978) 138 CLR 210; 78 ATC 4104; (1978) 8 ATR 452:
As applied to the business of a manufacturer of goods, accountants and commercial men by their use of the expression 'trading stock' denote not only the goods which he has manufactured and holds for sale but his stock of raw materials, components and partly manufactured goods...
Cars that are acquired for the purpose of restoration and resale will be the 'trading stock' of a restorer in the same way that raw materials, work in progress and finished goods are the 'trading stock' of a manufacturer of goods.
The entity is importing the luxury car for the purpose of restoring the car for sale and for no other purpose. Therefore the entity is importing the car with the intention of holding it as trading stock and the entity meets the requirements in paragraph 9-5(1)(a) of the LCT Act.
However, subsection 9-5(2) of the LCT Act provides that the entity is not entitled to quote its ABN unless the entity is registered for GST.
As the entity is registered for GST, it is entitled to quote its ABN under section 9-5 of the LCT Act, in relation to the importation of a luxury car when the entity imports the car to be restored and sold to a customer. Note: If the entity quotes its ABN in relation to the importation of the luxury car, the importation will not be a taxable importation of a luxury car (paragraph 7-10(3)(a) of the LCT Act). As the entity is not making a taxable importation no luxury car tax is payable on the importation (section 7-5 of the LCT Act).