23 Apr 14 GST and motor vehicle incentive payments - draft GSTR 2014/D1
On 23 April 2014 the ATO released for public comment by 6 June 2014 draft GST ruling GSTR 2014/D1 entitled “Goods and services tax: motor vehicle incentive payments”.
The draft ruling explains the Commissioner’s views on the GST consequences of incentive payments made by motor vehicle manufacturers, importers and distributors (manufacturers) to motor vehicle dealers (dealers).
The draft ruling seeks to provide practical guidance to the motor vehicle industry following the decision of the Full Federal Court in AP Group Limited v FCT  FCAFC 105; (2013) 214 FCR 301; 2013 ATC 20-417. As a result of the Court’s decision, the previous ATO view concerning the GST consequences of motor vehicle incentive payments can no longer be maintained.
The draft ruling makes some general observations relevant to the GST consequences of motor vehicle incentive payments and provides specific guidance on common types of incentive payments through worked examples. In preparing this draft ruling, the Commissioner has consulted with the motor vehicle industry to identify common payment types. The Commissioner welcomes any submissions identifying other types of motor vehicle incentive payments that should be included in the final ruling.
The draft ruling applies only to the class of entities that make or receive incentive payments in the motor vehicle industry. It is therefore confined to the facts and circumstances of the motor vehicle industry and does not consider incentive payments made in other industries. The draft ruling also does not discuss the GST consequences of motor vehicle holdback payments.
In considering the GST consequences, the draft ruling focuses on the requirement that there must be a “supply for consideration” in s 9-5(a) of the GST Act for there to be a taxable supply. For the purposes of the draft ruling, it is assumed that the other requirements set out in s 9-5 (taxable supplies) and s 11-5 (creditable acquisitions) of the GST Act are also satisfied.
The draft ruling proceeds on the basis that dealers acquire motor vehicles from manufacturers under a floor plan (bailment) arrangement, as described in paragraph 8 of the draft ruling. It is further assumed that there is no agency or partnership relationship between the entities involved in these arrangements.