This Draft GST Determination, released on Wed 8.5.2013, states that in the circumstances covered by the Determination, item 32 of the table in subreg 70-5.02(2) of the GST Regulations applies to some extent to an acquisition by a managed investment fund that is a recognised trust scheme from a Responsible Entity.
According to the Draft Determination, in calculating its entitlement to a reduced input tax credit under s 70-15 of the GST Act, it is necessary for the managed investment fund to determine:
- the extent to which its acquisition is covered by item 32 (in which case the percentage of the reduced input tax credit is 55%) and
- the extent to which its acquisition is covered by other reduced credit acquisition items (in which case the percentage of the reduced input tax credit is 75%).
It states the fund can apply any fair and reasonable methodology to determine the value of the part to which item 32 applies and the value of any other part to which other reduced credit acquisition items apply.
The Draft Determination states that a “deductive benchmarking methodology” is fair and reasonable where it reasonably approximates the respective values of the parts of the acquisitions. It also sets out the steps in undertaking this methodology and provides an example.
DATE OF EFFECT: When the final Determination is issued it is proposed to apply from 1 July 2012.
Comments are due by 5 June 2013. ATO contact: Rod Dunn – Tel: (03) 9275 9796; Fax: (03) 9275 2412; Email: Rodney.Dunn@ato.gov.au.
[LTN 85, 8/5/13]
[FJM Note: Reduced Input Tax Credits (‘RITC’) are available under s70-15 of the A New Tax System (Goods and Services Tax) Act 1999, at the rate set out in s70-5(2) – which in turn is the rate stipulated in the regulations made under that Act. Relevantly, regulation 70-5.03 stipulates that amount of a RITC is 75% of a full Input Tax Credit, for all the listed acquisitions other than item 32 and 55% for acquisitions of the type covered by item 32. For acquisitions that are a combination of items, then the RITC will be reduced by a combination of those rates (as is the case in this ruling). This draft determination follows on from legislative amendments made with effect from 1 July 2012, to treat trustee services generally (made by the trustee in its own right to the fund) as under item 32 (though there are a lot of carve-outs left as 75% RITC’s available to the fund). This draft determination confirms that a public unit trust that is a ‘managed investment scheme’ under s9 of the Corporations Act 2001, does make these blended acquisitions, and will need to settle a basis for striking a blended RITC rate.]