ATO Interpretative Decision

ATO ID 2003/702

Goods and Services Tax

GST and entitlement to input tax credits for acquisitions from unregistered suppliers
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the entity, a business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for an acquisition made from a supplier when the supplier quotes its Australian Business Number (ABN) on the invoice but the supplier is not registered, or required to be registered, for goods and services tax (GST)?

Decision

No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act, for an acquisition made from a supplier when the supplier quotes its ABN on the invoice but the supplier is not registered, or required to be registered, for GST.

Facts

The entity is a business operator. The entity made an acquisition from a supplier. The supplier provided the entity with an invoice that quoted the supplier's ABN. However, the supplier is neither registered nor required to be registered for GST.

The entity is registered for goods and services tax (GST).

Reasons for Decision

Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if:

(a): it acquires anything solely or partly for a creditable purpose; and
(b): the supply of the thing to it is a taxable supply; and
(c): it provides, or is liable to provide, consideration for the supply, and
(d): it is registered or required to be registered for GST.

Paragraph 11-5(b) of the GST Act requires the supply of the thing to the entity to be a taxable supply. Section 9-5 of the GST Act sets out the requirements for a taxable supply. One of these requirements is that the supplier is registered or required to be registered for GST (paragraph 9-5(d) of the GST Act).

The supplier has provided the entity with an invoice that quotes its ABN. However, an entity can have an ABN and not be registered for GST. An ABN is not evidence that an entity is registered for GST.

Although the supplier has an ABN, the supplier is not registered or required to be registered for GST. Therefore, its supply to the entity cannot be a taxable supply.

As such, the entity is not making a creditable acquisition and is not entitled to an input tax credit under section 11-20 of the GST Act for an acquisition made from a supplier when the supplier quotes its ABN on the invoice but the supplier is not registered, or required to be registered, for GST.

[Note 1: Before an entity can claim an input tax credit on an acquisition it makes, it must hold a tax invoice for the supply (subsection 29-10(3) of the GST Act). One of the requirements of a tax invoice is that it identifies that GST is included in the price of the supply (subsection 29-70(1) of the GST Act and regulation 29-70.01 of the A New Tax System (Goods and Services Tax) Regulations 1999)

Note 2: Where an entity has incorrectly claimed an input tax credit on its Business Activity Statement, it will need to correct the error. Information on correcting errors is available in the fact sheet Correcting GST Mistakes.

Note 3: Information on whether an entity is registered for GST can be obtained from the Australian Business Register at www.abr.gov.au.

Note 4: There may be an exception to the rules set out in this decision where the goods acquired from the unregistered supplier are second hand goods, which are acquired for re-sale. Division 66 of the GST Act allows input tax credits to be claimed in limited circumstances where second hand goods are acquired from unregistered suppliers. Refer to ATO ID 2002/27.]

Date of decision: 25 November 2002

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 11-5
   section 11-20
   subsection 29-10(3)
   subsection 29-70(1)

A New Tax System (Goods and Services Tax) Regulations 1999
regulation 29-70.01

Other References:
Fact sheet - Correcting GST Mistakes [NAT 4700]

Keywords
Goods and services tax
GST input tax credits & creditable acquisitions
GST registration
GST supplies & acquisitions
Creditable acquisition
Taxable supply

Business Line: GST

Date of publication: 8 August 2003

ISSN: 1445-2782

history

	Date:	Version:
You are here	25 November 2002	Original statement
	20 July 2007	Archived

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