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Taking the purpose out of creditable purpose

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Published on 01 Oct 16 by "THE TAX SPECIALIST" JOURNAL ARTICLE

For almost 16 years, since GST was introduced, practitioners have made endeavours to complete the puzzle on the meaning of “creditable purpose”. The definition of this foundational concept has been judicially considered in landmark cases such as HP Mercantile and Rio Tinto – both decisions attempting to shed light on s 11-15 of the A New Tax System (Goods and Services Tax) Act 1999, a unique provision with no real analogue in the GST/VAT world. This article explores the Rio Tinto decisions in the context of previous judicial decisions; proposes that determining creditable purpose involves a two-step process; and seeks to illustrate the relevant principles through a common and practical example. The author notes that Rio Tinto is unlikely to be the last judicial foray into the statutory construct of creditable purpose, especially as the case involved an enquiry into the relationship between an input and an intermediate output, though the decision enables practitioners to place a few more pieces into the GST puzzle.

Author profile

Prof Kevin O'Rourke OAM
Kevin O’Rourke OAM is Adjunct Professor, School of Accounting, Auditing and Taxation, UNSW Business School at the University of New South Wales. He is also a Director of O’Rourke Consulting and a former senior partner at both PwC and Deloitte. Kevin has 40 years of taxation experience and advises major corporate clients on all aspects of GST. As a legal practitioner, Kevin has been involved in numerous litigation matters, including Qantas and Travelex in the High Court. He is Chair of the Indirect Tax Committee for Chartered Accountants Australia and New Zealand, and a member of the ATO’s GST Stewardship Group. On Australia Day 2022, Kevin was awarded the Medal of the Order of Australia for service to the law. - Current at 04 August 2023
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