Service TaxGoods amp. Service tax (GST). How much GST input tax credit was Family Pty Ltd en d to for the car during the year that it held it
GST means the tax, which is imposed on goods and services, and is payable under the GST law. It is the sum of all of the GST for which an entity is liable, on the taxable supplies that are attributable to the tax period.
The net amount accruable for a tax period that applies to an entity is worked out using the following formula:
GST – Input tax credits.
Where: GST is the sum of all of the Goods and Services Tax for which an entity is liable on the taxable supplies, which are attributable to the tax period in question.
Thus, the amount of GST input tax credit was Family Pty Ltd entitled to for the car, which has the meaning given by section 995-1 of the ITAA 1997, during the year that it held the car is: $1000 – $200, which is equal to $800.
There is a new regulation in place, as a result of the announcement made by the Government in the 2007-08 Federal Budget, of various steps taken to enable small businesses to have more flexibility and a less complicated taxation system.
Due to the regulation, a GST registered entity can to claim GST credits for purchases with any GST-inclusive amount of $82.50 or less, without having to hold a recognized tax invoice. Previously, the threshold for this was $55, and the documentation needed for income tax purposes for purchases of $82.50 or less was sufficient to claim a GST credit.
The change, which takes effect from July 1, 2007, also means that suppliers will not have to issue tax invoices in any sale that is $82.50 or less.
Input tax credits are the sum of all of the input tax credits to which an entity is entitled for the creditable importation and acquisitions that can be attributed to that particular tax period.
When did that entitlement arise
The entitlement arose on the date when the car was transferred to Fred family. Generally, the termination value of any depreciating asset is equal to the amount received for the asset when it is disposed of. Under subsection 27-95(1) of the ITAA 1997, the termination value of a depreciating asset reduces if the balancing adjustment event is determined to be a taxable supply, with the reduction to be calculated as the amount of the Goods and Service Tax that is payable on supply.
The termination value of a car can be adjusted further by section 40-325 of the ITAA 1997. This section applies a ratio, or fraction to the termination calculated after reduction by subsection 27-95(1) of the ITAA 1997. This fraction is calculated as:
Limit of the car + the amount included in the second element of the car’s cost, divided by the car’s total cost.
Does Family Pty Ltd have a GST Liability on the transfer of the car Could Division 72 apply Give reasons.
Yes, There is a GST Liability on the transfer of the car, because the transfer was made to an associate. Family Pty Ltd has GST Liability to the previously attributed GST amount (which is described in section 19- 45.) on the transfer of the car, hence Division 72 is applicable.
Does the transfer of the car give rise to any adjustment events for the Family Pty Ltd Give reasons.
Yes. If the balancing adjustment event for any car to which the limit of the car, under section 40-230 of the ITAA 1997 applied is a taxable supply, the adjustment under section 40-325 of the ITAA 1997 is made after reducing the termination value by the amount of Goods and Service Tax that is payable on that particular supply, under subsection 27-95(1) of the ITAA 1997.
Is Fred Family entitled to any GST input credits when he acquires the car If so, how much amp. when does the entitlement arise
Fred Family is not an entity that is required to be registered as described by sections23-5, 57-20, 144-5 and 147-5, and so is not entitled to any GST input credits.
Australian Goods amp. Service Tax (GST) 1999. from www.ato.gov.au