The ATO has issued a Decision Impact Statement in relation to the Federal Court decision in LeasePlan Australia Limited v FCT  FCA 1309; 2009 ATC 20-144. The case concerned whether the taxpayer was entitled to input tax credits on the purchase of second-hand motor vehicles from unregistered persons to be leased back and then sold. In particular, at issue in the proceeding was whether s 66-5(1) of the GST Act was satisfied; in particular, whether the taxpayer purchased the vehicles "for the purposes of sale". The Court held that it had purchased for that purpose.
The ATO accepts that vehicle leasing companies that regularly purchase vehicles from unregistered parties on terms that provide for a period of leasing followed by sale by reference to an agreed residual value that reflects an estimate of the value of the vehicle at the end of the lease are entitled to input tax credits under Division 66 on the acquisition of the vehicles if the other requirements of that Division are satisfied. The same principles would apply if other second-hand goods are acquired in similar circumstances. However, the ATO does not consider that the decision is authority for the broader proposition that input tax credits are available under s 66-5 in any case where there is an intention that the goods will ultimately be sold.
The ATO will amend GSTR 2005/3 (Goods and services tax: arrangements of the kind described in Taxpayer Alert TA 2004/9 - exploitation of the second-hand goods provisions to obtain input tax credits) to reflect this decision.