Background

The price of new motor vehicles (explained below) is expected to fall after the Wholesale Sales Tax (WST) is replaced with a Goods and Services Tax (GST) on 1 July 2000. In addition, businesses purchasing motor vehicles would be entitled to an input tax credit for any GST paid, further reducing prices for them.

The Government recognises that allowing immediate, full GST input tax credits for new motor vehicles could disrupt motor vehicle markets. Businesses currently bearing WST on vehicles could delay purchases until after 1 July 2000, when the GST will apply.

Full input tax credits for new motor vehicles will therefore be phased in over two years. No input tax credits will be allowed in the GST's first year of operation, from 1 July 2000 to 30 June 2001. Half the value of the input tax credit will be allowed for purchases in the second year, from 1 July 2001 to 30 June 2002. Full input tax credits will be available for purchases from 1 July 2002.

New motor vehicles

What is meant by new motor vehicles?

This means:

• a new motor vehicle as defined in the Income Tax Assessment Act 1997. The meaning given there is any motor powered road vehicle (including four wheel drives)
• a new detachable trailer designed to be towed by a heavy prime mover such as a detachable trailer for a semi-trailer
• a new body for a motor vehicle, including an insulated body, tank body or other body designed for transporting goods (for example, a tank for transporting milk).

Are there any exceptions?

The phase in of input tax credits for new motor vehicles will not apply:

• if you would have been entitled to exemption from WST on the purchase of motor vehicles, as you have no incentive to delay purchases. Exempt organisations include schools and Public Benevolent Institutions such as the Red Cross and the RSPCA
• to new motor vehicles acquired or imported for the purposes of holding as trading stock, but not stock for hire
• to the purchase of new motor vehicles, by an insurance company as a replacement vehicle under the terms of an insurance policy (such purchases are unplanned and cannot be anticipated).