ATO Interpretative Decision
ATO ID 2003/424 (Withdrawn)
Goods and Services Tax
GST and registration of a maintenance reserve fund in a Queensland retirement villageFOI status: may be released
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This ATO ID is withdrawn as the principles are now covered in Miscellaneous Taxation Ruling MT 2006/1.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a maintenance reserve fund (MRF) in a Queensland retirement village, entitled to register for goods and services tax (GST) under Division 23 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Decision
No, the entity is not entitled to register for GST under Division 23 of the GST Act.
Facts
The entity, a trust fund, is a MRF established under section 97 of the Retirement Villages Act 1999 (Qld). The purpose of the fund is to set aside monies for maintenance and repair of the retirement village's capital items.
The Retirement Villages Act restricts the use of the MRF by the village operators to maintaining the village's capital items, paying the quantity surveyor's fees, and paying income tax on the interest earned by the fund.
The MRF may invest the monies of the fund to earn interest. However, the MRF does not make significantly sized regular, repetitive or planned investments. Nor does not it carry out activities in a business-like manner. The fund has no other activities aside from those allowed by the Retirement Villages Act.
Reasons for Decision
Division 23 of the GST Act sets out when entities are required to be registered and entities that may be registered for GST. To be able to register for GST an entity must be carrying on an enterprise or intending to carry on an enterprise.
Under subsection 9-20(1) of the GST Act, an enterprise is relevantly defined to include an activity, or series of activities done:
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- in the form of a business; or
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- in the form of an adventure or concern in the nature of trade.
Goods and Services Tax Determination GSTD 2000/8 considers what is an 'enterprise' for the purposes of the GST Act. Paragraph 3 of GSTD 2000/8 refers to Miscellaneous Taxation Ruling MT 2000/1, and states that the discussion in MT 2000/1 is considered to apply equally to the term 'enterprise' as used in the GST Act and can be relied on for GST purposes.
The definition of 'business' of defined to include 'any profession, trade, employment, vocation or calling but does not include occupation as an employee'.
The activity of investing the trust fund monies in an interest bearing account does not fit within the definition of a business. It is a not a profession, trade, employment, vocation or calling, nor does it come within the ordinary meaning of business. Therefore, the activities of the MRF cannot be said to be in the form of a business.
In paragraph 67 of Miscellaneous Taxation Ruling MT 2000/1, the meaning of adventure in the nature of trade is considered. It states "that 'an adventure in the nature of trade' is equivalent to an isolated business adventure as opposed to a continuing business." Therefore, an adventure in the nature of trade must have the hallmarks of a business, but is something that is isolated or irregular.
As the activities of the MRF consist solely of the activities allowed by the Retirement Villages Act, the MRF does not have the hallmarks of an isolated or irregular business activity. For this reason, the MRF is not an adventure or concern in the nature of a trade.
As the MRF is neither a series of activities conducted in the form of a business, nor an activity in form of an adventure of concern in the nature of trade it is not an enterprise for GST purposes.
Therefore, the entity is not entitled to register for GST under Division 23 of the GST Act, when it holds monies on trust for the retirement village's residents.
Date of decision: 31 October 2002
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
subsection 9-20(1)
Related Public Rulings (including Determinations)
GSTD 2000/8
MT 2000/1
ATO ID 2003/422
ATO ID 2003/423
Keywords
Goods and services tax
Carrying on an enterprise
Entity carrying on an enterprise GST enterprise
GST property & construction
GST retirement villages
ISSN: 1445-2782
| Date: | Version: | |
| 31 October 2002 | Original statement | |
| You are here | 9 April 2010 | Archived |