Identifying the supply for the purposes of claiming input tax credits

In a recent case, SVYR and FCT 2022, (SVYR) the taxpayer was denied input tax credits (ITC), due to the basic conditions for entitlement to claim an ITC not having been satisfied. In this case:

• The taxpayer sold mobile phone and tablet accessories as an agent for a telecommunications company (Telco).
• The taxpayer would invoice the customer for the total price of the accessories sold.
• Telco would then provide a credit to the customer if they agreed to participate in an arrangement, known as the ‘Accessory Repayment Option’. This credit was listed on the invoice to the customer as a credit against the cost of the accessories.

The taxpayer argued that they should only remit GST to the ATO on the net of, the total price, and the credit applied by Telco, as they did not receive the total price charged for the goods under the arrangement. This was on the basis that they had made a creditable acquisition from Telco, for which the consideration was the difference between the total price of the goods, and the actual cash received after applying the credit.

However, it was held that the taxpayer was not entitled to an input tax credit (ITC). The decision emphasises the importance of identifying the supply for which consideration has been paid when claiming an input tax credit. Key aspects of this are:

• There must be an identifiable supply made for consideration. In SVYR, there was no identifiable supply in the contractual documents. If anything, the Commissioner considered that there may be a financial supply of credit.
• Is the supply a taxable supply, or is it a GST free or input taxed supply? If the Commissioner concluded that the consideration was for a financial supply of credit, this would be an input taxed supply therefore no ITC entitlement would arise.
• The taxpayer must hold a valid tax invoice for the supply, in order to be eligible to claim an ITC.tax

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