Draft GST ruling, (GSTR 2014/D1)

Automotive industry welcomes support provided to car dealerships as the Commissioner of Taxation issued his preliminary guidance on the treatment of GST on the payments they receive from manufacturers.

Draft GST ruling, (GSTR 2014/D1) released yesterday, provides clarity for dealerships by simplifying the treatment on GST payable.

Tony Windle, National Head of Indirect Tax, Grant Thornton said the draft ruling will assist mid-sized businesses in the motor vehicle industry to navigate through the complex GST treatment of GST on ‘hold back’ payments, commonly known as incentive payments from the manufacturer to the dealership.

“Systems and processes will have to change, and dealerships will need to be in constant dialogue with the manufacturers. The draft ruling provides a level of clarity for dealerships as on what are complex arrangements.

“Furthermore, dealerships will need to consider the impact for the Luxury Car Tax calculated on certain holdbacks, as additional LCT may be payable,” says Mr Windle.

The current treatment of GST on holdback payments has traditionally been complicated to calculate as seen in the recent Federal Court’s decision for the AP Group. The draft ruling attempts to demystify the process.

“One of the key concerns expressed by the motor vehicle industry following the Federal Court’s recent AP Group decision is that certain payments made, constitute consideration for taxable supplies made by dealers.

“The flip side of this concern is that they do not give rise to a GST credit entitlement for manufacturers as those payments are third party consideration,” says Mr Windle.

The Commissioner takes the view that such outcomes could be addressed by the application of certain special GST rules, generally designed for consumer rebates.

“Whilst Grant Thornton agrees with the Commissioner’s view, we note that such special rules only applies to payments made from 1 July 2010 and has no application for payments made prior to 1 July 2010.

“The Commissioner should consider taking an administrative and pragmatic approach to address these concerns for payments made prior to 1 July 2010. The draft ruling, when finalised, is intended to apply from 1 May 2014,” says Mr Windle.

Please don’t hesitate to contact me if you would like me to put you directly in touch with Tony Windle.

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For more information, please contact:

Helina Lilley
National Public Relations Manager 
T +61 2 8297 2421
M +61 437 725 520
E helina.lilley@au.gt.com

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