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Motor vehicles, property and the GST

Written by the ATO

Issue

Charities were exempt from wholesale sales tax and with the introduction of the GST what impact will this have on charities selling cars? Is there any impact on charities in selling or purchasing property?

Principle

Entities that are registered for GST and are currently exempt from sales tax on the purchase of motor vehicles will be able to claim full input tax credits from the 1 July 2000. The normal transition arrangements where input tax credits are phased in do not apply to entities that are currently sales tax exempt for motor vehicles.

The sale of real property when it is residential premises that is used predominantly for residential accommodation is input taxed under s40-65(1). However the sale of commercial residential premises or new residential premises is a taxable supply under s40-65(2).

Specific Questions and Answers

  1. What happens where a school (charity) sells a motor vehicle 2 years after purchasing it for less than 75% of the consideration the supplier provided (the original market value - will it be GST free despite the fact that the selling price may not be less than 50% of the market value for a similar second hand vehicle?

    Assuming the school is treated as a charity the supply of the vehicle for less than 75% of the cost to acquire the vehicle will be GST free under s38-250 of the GST Act irrespective of whether the sale price is greater than 50% of the market value for a similar second hand vehicle.

  2. Do company cars attract the full input tax credits regardless of any private use by employees of the company car? Does the organisation need to apportion any of the GST in the purchase of the car?

    Where a company car is a creditable acquisition to the organisation then the organisation would be entitled to full input tax credits. Full input tax credits are available from 1 July 2000 where the organisation would have been entitled to an exemption from WST on the purchase of the vehicle, if it still applied.

    There may be fringe benefit tax implications where employees use the company car for private use.

  3. A charity sells a community hall. The hall has been used for both charitable activity and has also been hired out at commercial rates. How will the sale of the hall be affected by the introduction of the GST?

    The sale of the hall will be subject to the normal rules, as it does not matter how the hall was used prior to its sale. A hall would be a supply and if it met all other tests then it would be treated as a taxable supply.

  4. Will the sale of buildings owned by charities and organisations that use them for non-commercial GST-free activities be subject to GST? Is the sale of a gifted real property GST-free, regardless of changes made to that property or usage of that property?
  5. The sale of buildings regardless of their prior use is generally a taxable supply. However, there are some exceptions to this principle.

    If the premises are, or are intended to be used for residential accommodation, the sale will be input taxed, unless the sale constitutes the sale of new residential premises.

    An example of a new residential sale would be a church that has been turned into a residence and is sold for the first time as a residence. In this instance, the sale would be taxable.

    However, if the church had acquired a property as a residential property, any subsequent sale (provided it was still used for residential purposes) would be input taxed.

    Sales of gifted real property will not be GST free. Such sales will be treated in the manner described above.

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