If the syndicate is a partnership for tax purposes or an unincorporated association or body of persons it is the syndicate supplying the animal to race rather than the individual members of the syndicate. Therefore, it is the syndicate that needs to apply the enterprise test.
If the syndicate does not meet the partnership definition for income tax purposes or the unincorporated association or body of persons tests then it is the individual members that are supplying the animal to race. Each individual within the ownership group then needs to apply the enterprise test to themselves.
Example of an enterprise
In the following examples Richard is an owner, with no income from other racing activities such as breeding or training.
Richard, however, conducts his ownership activities in the form of a business, by:
- keeping records of his purchases, sales, prizes won and all outgoings
- maintaining a good knowledge of the racing industry and using this to have a reasonable expectation of making a profit as an owner
- a history showing a profit in previous years
- being involved as an owner in a number of animals
- selling his animals when he believes they are no longer profitable and purchasing another animal
- having a business plan, and
- not conducting the activity as a hobby.
Richard will meet the enterprise test.
Richard purchases a new animal, retains 50% ownership and offers the other 50% to a group of people who have an interest in racing. This group, excluding Richard, form a syndicate that is recognised by the racing body. Assume that the syndicate does not constitute a partnership for income tax purposes but meets the tests of an unincorporated association as set out in question 1. The animal, therefore, has two owners, Richard (as an individual), and the syndicate. The two owners constitute two separate entities.
Given the facts above, Richard is likely to have an ABN, and be registered for GST. The syndicate, however, will need to apply the enterprise test to determine whether it is entitled to an ABN or can register for GST.
Richard retains a 100% ownership in an animal, and races the animal as a single individual. Richard as an individual, is an entity.
Again, given the facts in relation to the way Richard operates his ownership activities, he is likely to satisfy the enterprise test, and be able to obtain an ABN and register for GST.
Richard transfers 50% of the ownership of an animal to his wife. The ownership papers show both names, and the activities are now carried on as a partnership for income tax purposes. The partnership forms one entity.
For the partnership to obtain an ABN and register for GST, it must, separately, satisfy the enterprise test. This is regardless of whether Richard, as an individual, has already done so. If the partnership is entitled to an ABN, it will get a separate and unique ABN distinct from Richard's ABN
Richard retains a 1/3rd ownership in an animal, and sells equal shares to two other individuals who have no connection with each other. The three individuals each operate separate bank accounts for any earnings associated with the animal, and are invoiced separately by the trainer. They each constitute a separate entity.
Again, assuming the facts above in relation to Richard's activities, he will be able to obtain an ABN and register for GST as a separate entity. The other two entities would have to satisfy the enterprise test criteria in their own right.