Are you entitled to claim the full GST credit of the GST paid on the acquisition of the Vehicle under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Yes. This ruling applies for the following period: 1 July 20XX till 30 June 20XX
You are registered for GST. You purchased a Vehicle. The Vehicle was advertised as a commercial vehicle and no Luxury Car Tax was applicable as per the invoice for the purchase provided. The Vehicle is 100% used for business use. The Vehicle specifications state: • Gross vehicle Mass (GVM): XKg • Kerb Weight: Xkg • Payload: Xkg • Towing Capacity: Xkg • Seating Capacity: X seats
A New Tax System (Goods and Services Tax) Act 1999 section 11-5 A New Tax System (Goods and Services Tax) Act 1999 section 11-20 A New Tax System (Goods and Services Tax) Act 1999 subsection 69-10(1) A New Tax System (Goods and Services Tax) Act 1999 subsection 69-10(4) A New Tax System (Luxury Car Tax) Act 1999 paragraph 25-1(2)(c) Income Tax Assessment Act 1997 section 995-1
All references are to A New Tax System (Goods and Services Tax) Act 1999 unless otherwise stated. Under section 11-20 you are entitled to GST credit for any creditable acquisition that you make. Section 11-5 provides that you make a creditable acquisition if: (a) you acquire anything solely or partly for a creditable purpose, (b) the supply of the thing to you is a taxable supply, (c) you provide, or are liable to provide, consideration for the supply, and (d) you are registered or required to be registered for GST. Under subsection 11-15(1), you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, under subsection 11-15(2) you do not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed, or the acquisition is of a private or domestic nature. Based on the information provided, you satisfy paragraphs 11-5(a) to (d) as follows:
• you purchased the Vehicle to carry on your enterprise and the Vehicle is used 100% for business purposes and you do not use the Vehicle to make any input taxed supplies. Therefore, you acquired the Vehicle for a creditable purpose, and • the supply of the Vehicle to you is a taxable supply, and • you provided consideration for the Vehicle, and • you are registered for GST. Therefore, you made a creditable acquisition under section 11-5 when you acquired the Vehicle for your business. You are therefore entitled to claim GST credits on the Vehicle. The car limit The amount of GST credit for a creditable acquisition is equal to the GST payable on the supply of thing acquired unless: • the acquisition is partly creditable; in which case, the GST credit is worked out based on the extent of the creditable purpose, or • subsection 69-10(1) applies.
Subsection 69-10(1) limits the amount of input tax credit for a creditable acquisition or creditable importation of a 'car'. Where the GST inclusive market value of the 'car' exceeds the 'car limit' for the financial year in which you first used the car for any purpose, the amount of input tax credit is 1/11th of that limit. For the purpose of subsection 69-10(1), a 'car' refers to the Income Tax Assessment Act 1997 (ITAA 1997) section 995-1. Section 995-1 of the ITAA 1997 defines a 'car' as a motor vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers. The question of what load a vehicle is designed to carry is determined by the Australian Design Rules (ADR) and, on this basis, the designed load of a vehicle is calculated as: Maximum loaded vehicle weight (or gross vehicle weight, which is typically shown on the compliance plate attached to a vehicle's engine bay, door pillar or footwell by the manufacturer or importer). Less:
Unladen vehicle weight (or basic kerb weight, which is the weight of the vehicle with a full capacity of lubricant, coolant and fuel together with spare wheel, tools (including jack) and installed options, but excluding the weight of goods or occupants). If the vehicle is designed to carry a load more than 1 tonne, it is not defined as a 'car' for GST purposes and the car limit under section 69-10(1) would not apply. The Vehicle is designed to carry a load of less than 1 tonne and fewer than 9 passengers. For the 20XX/XX financial year, the car limit is $XX. The Vehicle was purchased for an amount exceeding the 'car limit' during the 20XX/XX financial year. However, subsection 69-10(4) provides an exclusion to subsection 69-10(1). Subsection 69-10(4) provides that subsection 69-10(1) does not apply to a vehicle that is not a luxury car under subsection 25-1(2) of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act). Commercial Vehicles Paragraph 25-1(2)(c) of the LCT Act provides that a car is not a luxury car if it is a commercial vehicle that is not designed for the principal purposes of carrying passengers.
The term 'commercial vehicle' is not defined in the LCT Act and therefore, the ordinary meaning of the words applies. The Macquarie Dictionary online, www.macquariedictionary.com.au, gives the following meaning to the term 'commercial vehicle': a vehicle able to carry goods or passengers, and designated for use by businesses, as a panel van, utility, etc. Vehicles that are listed as a dual cab, are assessed under the vehicle type of a crew cab as per Miscellaneous Taxation Ruling MT 2024 Fringe benefits tax: dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel (MT 2024). Crew cab vehicles with a load carrying capacity of less than two tonnes can be designed to carry both passengers and goods. The principal purpose of these vehicles depends on its load carrying capacity and whether it is designed to carry mainly passengers or goods. MT 2024 provides a calculation that can be used to determine the principal purpose for which a crew cab has been designed. MT 2024 details the method used to determine whether the principal purpose of a vehicle is for carrying passengers and states the following at paragraph 14:
...It is considered that the appropriate basis for determining this issue is whether or not the majority of the designed load capacity is attributable to passenger carrying capacity. This approach is consistent with that adopted under the Australian Design Rules (ADR) in determining what is a passenger vehicle. The ADR at 4.5.2 states that: A vehicle constructed for both the carriage of persons and the carriage of goods shall be considered to be primarily for the carriage of goods if the number of seating positions times 68kg is less than 50 percent of the difference between the 'Gross Vehicle Mass' and the 'Un-laden Mass'. This calculation provides that a vehicle will be considered to be constructed for primarily carrying goods if the number of seats multiplied by 68kg is less than 50% of the difference between the GVM and the unladen mass (i.e. the payload). In this case, based on the information provided, the Vehicle has a principal purpose of carrying goods, as the number of seats (X) × 68kg = XXX which is less than 50% of the Vehicles payload XXXkg. Conclusion
Taking into account the calculation utilised from MT 2024, the Vehicle is considered a commercial vehicle that is not designed for the principal purpose of carrying passengers, instead the Vehicle is a commercial vehicle used for the principal purpose of carrying goods used for business or trade. Therefore, as the Vehicle is not a luxury car in accordance with subsection 25-1(2) of the LCT Act, subsection 69-10(4) excludes the application of subsection 69-10(1) to your GST credits claim on the purchase of the vehicle. Accordingly, you are entitled to claim the full GST credit equal to the GST that you paid on the acquisition of the vehicle.