A New Tax System (Goods and Services Tax) Act 1999
|Chapter 4 - The special rules
|Part 4-2 - Special rules mainly about supplies and acquisitions
The special rules in this Part mainly modify the operation of Part 2-2, but they may affect other Parts of Chapter 2 in minor ways.
|Division 70 - Financial supplies (reduced credit acquisitions)
70-20 Extent of creditable purpose
(a) a *reduced credit acquisition is a *creditable acquisition; and
(b) it is not wholly for a *creditable purpose because of this Division;
it is *partly creditable.
The extent to which the acquisition is acquired or applied for a *creditable purpose is worked out using the following formula:
extent of creditable purpose is the extent to which the purpose for which you applied or acquired the acquisition was a *creditable purpose otherwise than because of this Division, expressed as a percentage.
extent of Division 70 creditable purpose is the extent to which the purpose for which you applied or acquired the acquisition was a *creditable purpose because of this Division, expressed as a percentage.
percentage credit reduction is the reduced input tax credit percentage prescribed for the purposes of subsection 70-5(2) for an acquisition of that kind.
This section affects sections 11-30 and 129-40. It is used even if the reduced credit acquisition is used wholly in carrying on your enterprise (unless the acquisition was wholly for a creditable purpose because of this Division, then section 70-15 applies).
You make a reduced credit acquisition of $110,000, wholly for the purposes of carrying on your enterprise, partly for the purpose of making financial supplies (40%) and partly for the purpose of making taxable supplies (60%). Assume the percentage credit reduction to be 50%. The extent to which you make the acquisition for a creditable purpose is:
60% + [40% × 50%] = 80%
Applying section 11-30, your input tax credit is $8,000 (assuming you were liable for all the consideration).
You subsequently apply the acquisition partly in making financial supplies (40%), partly in making taxable supplies (40%) and partly for private use (20%). The extent to which you made the acquisition for a creditable purpose is:
40% + [40% × 50%] = 60%
Applying Division 129, your input tax credit is reduced to $6,000, giving you an increasing adjustment of $2,000.
The Commissioner may determine, in writing, one or more ways in which to work out, for the purpose of subsection (2), the extent to which an acquisition is for a *creditable purpose.
S 70-20(3) inserted by No 177 of 1999, s 3 and Sch 1 item 85, effective 1 July 2000.