70‑20 Extent of creditable purpose70‑20 Extent of creditable purpose

70‑20 Extent of creditable purpose

(1) If: (a) a *reduced credit acquisition is a *creditable acquisition; and (b) it is not wholly for a *creditable purpose because of this Division; it is *partly creditable. (2) The extent to which the acquisition is acquired or applied for a *creditable purpose is worked out using the following formula:

Start formula Extent of creditable purpose plus open bracket Extent of Division 70 creditable purpose times Percentage credit reduction close bracket end formula

where:

extent of creditable purpose is the extent to which the purpose for which you applied or acquired the acquisition was a *creditable purpose otherwise than because of this Division, expressed as a percentage.

extent of Division 70 creditable purpose is the extent to which the purpose for which you applied or acquired the acquisition was a *creditable purpose because of this Division, expressed as a percentage.

percentage credit reduction is the reduced input tax credit percentage prescribed for the purposes of subsection 70‑5(2) for an acquisition of that kind.

Note: This section affects sections 11‑30 and 129‑40. It is used even if the reduced credit acquisition is used wholly in carrying on your enterprise (unless the acquisition was wholly for a creditable purpose because of this Division, then section 70‑15 applies).

Note: Example 1: You make a reduced credit acquisition of $110,000, wholly for the purposes of carrying on your enterprise, partly for the purpose of making financial supplies (40%) and partly for the purpose of making taxable supplies (60%). Assume the percentage credit reduction to be 50%. The extent to which you make the acquisition for a creditable purpose is:

Start equation 60% plus open bracket 40% times 50% close bracket equals 80% end equation

Note: Applying section 11‑30, your input tax credit is $8,000 (assuming you were liable for all the consideration).

Note: Example 2: You subsequently apply the acquisition partly in making financial supplies (40%), partly in making taxable supplies (40%) and partly for private use (20%). The extent to which you made the acquisition for a creditable purpose is:

Start equation 40% plus open bracket 40% times 50% close bracket equals 60% end equation

Note: Applying Division 129, your input tax credit is reduced to $6,000, giving you an increasing adjustment of $2,000.