Limitations on the Right to Credit Input Tax: Rio Tinto Services Limited v Commissioner of Taxation

World Journal of VAT/GST Law, Vol. 5, No. 1, pp. 42-47, 2016

Sydney Law School Research Paper No. 16/33

8 Pages Posted: 1 May 2016 Last revised: 15 Jun 2016

See all articles by Rebecca Millar

Rebecca Millar

The University of Sydney Law School

Date Written: April 28, 2016

Abstract

This case note discusses a recent decision handed down by the Full Court of the Federal Court of Australia on the deductibility of input tax under Australia’s goods and services tax (GST), a credit-invoice method VAT. The case dealt with input tax incurred in the course of providing subsidised accommodation to mine workers and service providers in towns established in remote areas of North Western Australia, where members of the Rio Tinto group conduct mining activities.

The input tax in question related to the construction and purchase of new residential housing, and the repair, maintenance, and servicing of existing residences. Under the Australian GST, leasing residential property is ‘input taxed’ (exempt without a right to credit related input tax) but the taxpayer argued that the input tax should nonetheless be creditable because the ultimate purpose of incurring the input tax and providing the residential accommodation was to enable the companies to carry out their fully taxable and ‘GST-free’ (zero-rated) mining activities.

As well as discussing the arguments and outcome of the case, the case note compares the Australian decision with a recent CJEU decision on the right to deduct input tax under the European VAT Directive (Case C-126/14 UAB ‘Sveda’, decided on 22 October 2015).

Keywords: VAT, GST, consumption tax, input tax, right to deduct, creditable purpose, exempt supplies, input taxed supplies

JEL Classification: K10, K30, K34

Suggested Citation

Millar, Rebecca Mescal, Limitations on the Right to Credit Input Tax: Rio Tinto Services Limited v Commissioner of Taxation (April 28, 2016). World Journal of VAT/GST Law, Vol. 5, No. 1, pp. 42-47, 2016; Sydney Law School Research Paper No. 16/33. Available at SSRN: https://ssrn.com/abstract=2772375

Rebecca Mescal Millar (Contact Author)

The University of Sydney Law School ( email )

New Law Building, F10
The University of Sydney
Sydney, NSW 2006
Australia

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