TAXATION RULING NO. ST 2006

ST 2006

LEASING OF SERVICE & CONSTRUCTION EQUIPMENT

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FOI status:

PREAMBLE

Until 1 January 1983 most service and construction equipment was exempt from sales tax under repealed item 113(f), First Schedule. However, on and after 1 January 1983 that equipment became taxable at the rate of 7.5% under new item 7(1), Third Schedule.

FACTS

2. A substantial proportion of heavy construction equipment is leased by its users rather than purchased outright. Many such leases would have been entered into prior to 1 January 1983 but the lease payments continued to be made after 1 January 1983.

RULING

3. Leases entered into by registered persons prior to 1 January 1983, where the equipment was for use in conditionally exempt circumstances, will continue to be exempt after 1 January 1983 until the term of the lease has expired irrespective of the timing of the lease payments. Leases entered into after 31 December 1982 will, however, have to be considered for sales tax purposes in the light of the legislation as it then applies. Therefore, new leases of goods previously leased in conditionally exempt circumstances within the terms of former item 113F(1) in the First Schedule to the Sales Tax (Exemptions and Classifications) Act may be liable to tax at the rate of

7.5% where the equipment is for lease in circumstances covered by item 7(1) in the Third Schedule. The tax liability will depend on the terms of the lease and take into account the value of prior leases for the purposes of determining whether overall the lease payments have reached a fair and reasonable value for the purposes of ascertaining the sale value under section 4(1) of Sales Tax Assessment Act No. 9.

4. Leases of goods entered into by registered persons after 1 January 1983 in circumstances covered by item 7(1) will be taxable at 7.5% on a sale value which, in the opinion of the Commissioner, is fair and reasonable having regard to the terms of the lease and the market value of the goods. Generally, tax will be payable on such leases until such time as the lease payments equal the fair and reasonable wholesale value of the goods.

COMMISSIONER OF TAXATION
26 January 1983

References

ATO references:
NO 82/5411 F6

Date of effect:
1 Jan 1983

Date original memo issued:
5 Jan 1983

Subject References:
SERVICE EQUIPMENT
CONSTRUCTION EQUIPMENT
LEASES

Legislative References:
SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT THIRD SCHEDULE ITEM 7(1)
STAA (9) Section 4(1)