Edited version of private ruling

Authorisation Number: 1011534943615

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Ruling

Subject: Lodgment where no business activity is being carried on

Question 1

Where a company is merely incorporated to act as a corporate trustee for a self managed superannuation fund (SMSF) and that company does not engage in any form of trading and the lodgment aspects of the SMSF have been fulfilled is it required to lodge an activity statement in the capacity of the company (not being a corporate trustee)?

Answer

If you cancel your GST registration you will cease to receive activity statements or annual GST returns.

Question 2

Where a company is merely incorporated to act as a corporate trustee for a self managed superannuation fund (SMSF) and that company does not engage in any form of trading and the lodgment aspects of the SMSF have been fulfilled is it required to lodge an income tax return in the capacity of the company (not being a corporate trustee)?

Answer

Dependant on the circumstances for the given year, you may not be required to lodge an income tax return each year where there are no activities carried on and no income derived.

This ruling applies for the following period

1 July 2008 to 30 June 2009

1 July 2009 to 30 June 2010

The scheme commenced on

1 July 2008

Relevant facts

You have been incorporated for the purpose of acting as a corporate trustee for a complying self managed superannuation fund (SMSF).

The company does not perform any other duties or carry out any trading in its own right. The tax obligations of the SMSF have been fully complied with.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 section 23-10

A New Tax System (Goods and Services Tax) Act 1999 section 23-15

Income Tax Assessment Act 1936 section 161

Reasons for decision

Question 1

Summary

If you cancel your GST registration you will cease to receive activity statements or annual GST returns.

Detailed reasoning

You are currently registered for an ABN and also for GST. As a result of your GST registration you receive an annual GST return requiring you to remit any GST collected throughout the relevant period. The annual GST return also allows you to claim any GST credits incurred throughout the relevant period.

You are required to be registered for GST if you meet the conditions as set out in section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). Section 23-5 provides the following:

You are required to be registered under this Act if:

(a) you are *carrying on an *enterprise; and

(b) your GST turnover meets the registration turnover threshold

The registration turnover threshold in accordance with section 23-15 of the GST Act is $75,000 per year from 1 July 2007.

Section 23-10 of the GST Act advises that you may be registered if you choose to do so. Section 23-10 provides the following;

(1) You may be *registered under this Act if you are carrying on an *enterprise (whether or not your *GST turnover is at, above or below the *registration turnover threshold).

(2) You may be *registered under this Act if you intend to carry on an *enterprise from a particular date.

As your turnover is nil due to the fact that you are not carrying on a business nor trading in your own right as a company, you do not have an obligation to be registered for GST under section 23-5 of the GST Act. As you are not carrying on an enterprise then you cannot choose to be registered for GST under section 23-10 of the GST Act. You should therefore cancel your GST registration which will result in the cessation of GST annual returns being issued to you. Whilst your GST registration remains active, annual GST returns will continue to issue.

Question 2

Summary

Dependant on the circumstances for the given year, you may not be required to lodge an income tax return each year where there are no activities carried out and no income derived.

Detailed reasoning

Subsection 161(1) of the Income Tax Assessment Act 1936 (ITAA 1936) states:

Every person must, if required by the Commissioner by notice published in the Gazette, give to the Commissioner a return for a year of income within the period specified in the notice.

As required by section 161 of the ITAA 1936, the lodgment legislative instrument (which replaces the Gazette notice) sets out each year the persons, or class of persons, who are required to lodge an income tax return for the financial year.

The 2009 and earlier lodgment legislative instruments define a full self assessment taxpayer to include a company.

Table F of the Legislative instrument 2009, registered for the purposes of subsection 161(1), provides that the following class of person is required to lodge a return:

Every person being a full self-assessment taxpayer (excluding trustees of superannuation funds, approved deposit funds and pooled superannuation trusts) not covered by Table N or Table O that during the year of income:

(1) is an Australian resident, and derived income (including capital gains) from sources in Australia or sources outside Australia; or

(2) is a non-resident of Australia, and derived income (including capital gains) that is taxable in Australia other than:

- dividend, interest or royalty income subject to withholding payments covered by Subdivision 12-F in Schedule 1 to the Taxation Administration Act 1953, and

- fund payments from managed investment trusts subject to withholding because of the amendments to Subdivision 12-H in Schedule 1 to the Taxation Administration Act 1953 made by Tax Laws Amendment (Election Commitments No 1) Act 2008 (relating to fund payments from managed investment trusts to non-residents).

There are other factors as outlined in the Legislative Instrument, in addition to the above, which provide circumstances where lodgment is required. Examples as contained in table A of the Legislative Instruments where an income tax return may be required to be lodged even though no income has been derived are:

- incurred a tax loss or made a net capital loss or is entitled to deduct a tax loss or apply a net capital loss of an earlier year of income, or being a company or trust estate has undeducted tax losses or unapplied net capital losses of any earlier year of income where those losses exceed $1,000 or, being a company, transfers a tax loss or net capital loss to another group company; or

- carried on a business; or

- was entitled to income as a beneficiary of a trust estate that has operated a 'primary production business' (as defined in section 995-1 of the Income Tax Assessment Act 1997) in Australia; or

- had an individual interest in the net income or partnership loss of a partnership which operated a primary production business (as defined) in Australia.

Where none of the above conditions required to lodge an income tax return are met then you should still advise the Commissioner that no income tax return will be lodged.

Although the Legislative Instrument states who is required to lodge a return and does allow for exemptions, it also specifically states, as follows, that the instrument does not remove the Commissioner's power to require lodgment of a return:

Notice of requirement to lodge a return or information

Nothing in this Instrument prevents me or an authorised officer of the Australian Taxation Office from issuing a notice, pursuant to section 162 or 163 of the Income Tax Assessment Act 1936, requiring a person to give me, in the approved form, a return, or further returns, or any information, statement or document about the person's financial affairs for any year of income.

Therefore even where no assessable income is derived you may still be required to lodge an income tax return where the Commissioner directs you to do so.

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