GST 2016

Taking the purpose out of creditable purpose

Source: The Tax Specialist Journal Article

Published Date: 1 Oct 2016


For almost 16 years, since GST was introduced, practitioners have made endeavours to complete the puzzle on the meaning of creditable purpose. The definition of this foundational concept has been judicially considered in landmark cases such as HP Mercantile and Rio Tinto " both decisions attempting to shed light on s 11-15 of the A New Tax System (Goods and Services Tax) Act 1999, a unique provision with no real analogue in the GST/VAT world. This article explores the Rio Tinto decisions in the context of previous judicial decisions; proposes that determining creditable purpose involves a two-step process; and seeks to illustrate the relevant principles through a common and practical example. The author notes that Rio Tinto is unlikely to be the last judicial foray into the statutory construct of creditable purpose, especially as the case involved an enquiry into the relationship between an input and an intermediate output, though the decision enables practitioners to place a few more pieces into the GST puzzle.

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GST 2016

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