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Authorisation Number: 1012266243209

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Ruling

Subject: GST and carrying on an enterprise

Question

Are you carrying on an enterprise for goods and services tax (GST) purposes?

Answer

No.

Relevant facts and circumstances

You are not registered for GST and you do not have an Australian business number.

You do not have funding for the activities you carry on (activities), any business or marketing plan or any existing or potential customers.

The activities have no repetition or regularity.

The activities are a subset of or similar to what a related company had done or had intended to do prior to these kinds of activities being determined by the ATO not to be an enterprise.

You have had no business activity whatsoever.

You may make losses in some periods and profits in others and perhaps no change in position in others.

The activities may create the scenario where liabilities may exceed assets according to taxation reporting rules.

You have not had supplies and no business listings either through telephone directories or on the internet.

You may or may not carry out activities in a similar manner to that of other businesses in the same or similar industry. Your intention is to be different rather than similar to those entities in the same or similar industry.

There is a purpose of profit as well as a prospect of you making a profit and the activities are not inherently unprofitable.

You presently have no employees.

There is currently a market or potential markets for you.

You have strategies in place to cover expenses incurred.

You keep books of accounts and other records.

You have knowledge, experience and skills in activities carried on by other entities in a similar industry.

In a letter to you, you were asked to provide a description of all the commercial activities you are to undertake, intend to undertake or are presently undertaking.

In your response to the above request for information, you state that you would not be carrying on any commercial activities.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Subsection 9-20(1)

Section 25-5.

Reasons for decision

An enterprise for GST purposes in defined in subsection 9-20(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). It includes in the definition (these being the only paragraphs relevant to your circumstances) an activity, or series of activities, done in the form of a business or in the form of an adventure or concern in the nature of trade (one-off commercial activities).

In the form of a business

The public ruling Miscellaneous Taxation Ruling MT 2006/1 provides the ATO view on the definition of enterprise for GST purposes. In the case of activities done in the form of a business, paragraph 178 of MT 2006/1 provides several factors, the majority of which need to be present to indicate activities are carried on in this manner. These factors are as follows:

· a significant commercial activity

· a purpose and intention of the taxpayer to engage in commercial activity

· an intention to make a profit from the activity

· the activity is or will be profitable

· the recurrent or regular nature of the activity

· the activity is carried on in a similar manner to that of other businesses in the same or similar trade

· activity is systematic, organised and carried on in a businesslike manner and records are kept

· the activities are of a reasonable size and scale

· a business plan exists

· commercial sales of product, and

· the entity has relevant knowledge or skill.

In your case, the majority of these factors are not present. You have no significant commercial activity or purpose; no marketing plan; there is no recurrent or regular nature of the activities and no clear purpose on how you intend to make a profit from your activities. Given this, your activities are presently not carried on in the form of a business.

One-off commercial transactions

You have stated you would not be carrying on any commercial activities so there are also no identifiable one-off commercial transactions.

Given this, you are not carrying on activities either in the form of a business or as a one-off commercial transaction. Consequently, you are not carrying on an enterprise for GST purposes.

This would also imply that you are not entitled to register for GST under section 25-5 of the GST Act.