Question

Explain whether input tax credits would be available for the following acquisitions. You can assume that the acquirer is registered and, where appropriate, GST has been charged on the supply
1. a hot water system, costing $1,870, purchased by a landlord for installation in an office rented to an accountant for use as her business premises
2. $1,100 spent on a meal and wine by a business person for himself and two of his clients
3. a car purchased by an employer to provide to an employee as a fringe benefit for the employee’s private use
4. a $660 establishment fee paid by an individual to a bank when the bank lends her $50,000 to renovate her business premises
5. a company costing $4,400 purchased by an employee. The computer is used by the employee 30% of the time when she is working at home for her employer and 70% for playing games and using Facebook

Answer 1

1. A hot water system, costing $1,870, purchased by a landlord for installation in an office rented to an accountant for use as her business premises- YES, input tax credit will be available to the landlord in this situation as the goods are for use in business on a rented property.

2. $1,100 spent on a meal and wine by a business person for himself and two of his clients- YES, input tax credit will be available to the business person in this case as GST allows the claim of credit on tax paid for meals with business associates.

3. A car purchased by an employer to provide to an employee as a fringe benefit for the employee’s private use- NO, Input tax credit will not be available in this case as fringe benefits are an exception to input tax credits under GST.

4. A $660 establishment fee paid by an individual to a bank when the bank lends her $50,000 to renovate her business premises- YES, input tax credit will be available in this case as under reverse charge mechanism, thee amount can be availed under input tax credit.