Hi,
As per QC16282, all components of a hire purchase agreement entered into on or after 1 July 2012 are subject to GST, the taxpayer can claim one-eleventh of all components, including the credit component and any associated fees and charges that have been subject to GST under the agreement. The example in QC16282 is below:
Example: hire purchase agreement entered into on or after 1 July 2012
Continuing the example above, Albert decides to buy a second freezer on hire purchase from Friendly, on the same terms as above, on 20 July 2012.
Because the agreement is entered into after 1 July 2012, both the principal and interest component of the supply are subject to GST.
The freezer is delivered on 7 August 2012 and Friendly notifies Albert that the principal component of the first instalment is $550. This means the credit component of the first instalment is $120.
Albert can claim a GST credit for the GST included in both the price of the freezer and the interest charged. As the agreement was after 1 July 2012, the interest is not a financial supply (even though it is separately disclosed).
Whether Albert accounts for GST on a cash or non-cash basis, he can claim a GST credit of $3,654.54 (one-eleventh of $40,200) for the tax period ending 30 September 2012, as this is the period in which he pays the first instalment.
I want to confirm if a Chattel mortgage, instead of hire purchase agreement is entered after 1 Jul 2012 in above example with the same term, will the GST implication be the same? So the taxpayer can claim $3,654.54 (one-eleventh of $40,200) up front? Or, the taxpayer can only claim $3,000 (one-eleventh of $33,000, the price of the freezer) as the interest component is not subject to GST in Chattel mortgage, which differs to hire purchase?
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