Edited version of private advice

Authorisation Number: 1051515388143

Date of advice: 21 May 2019

Ruling

Subject: GST and enterprise

Question 1

Is the entity carrying on an enterprise?

Answer

No. The entity is not carrying on an enterprise.

Question 2

Is the entity required to be registered for GST?

Answer

No. The entity is not required to be registered for GST.

Relevant facts and circumstances

The trust entity was established for the purpose of providing a benefit to its beneficiaries. One of the ways in which the entity provides the benefits is through the employment of domestic staff to assist the beneficiaries in their private lives. The entity does not derive nor does it intend to derive any income from its activities.

The substance of the activities of the entity is simply the making available of certain persons to assist the family, primarily in their private and domestic lives and to pay certain private and domestic expenses for the benefit of the family.

The entity does not exact any fee for the provision of these services and there in no profit sought to be made in connection with the provision of the services. Rather, it is merely a private and domestic arrangement undertaken to support the beneficiaries in their personal lives.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

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

Reasons for decision

Enterprise

Section 9-20 of the GST Act defines the term 'enterprise' widely to include an activity or series of activities done:

(a)  in the form of a business; or

(b)  in the form of an adventure or concern in the nature of trade.

The Commissioner's views on the meaning of entity carrying on an enterprise for the purpose of entitlement to an Australian Business Number are expressed in Miscellaneous Taxation Ruling MT 2006/1. The views in MT 2006/1 equally apply to GST (per Goods and Services Tax Determination GSTD 2006/6).

In the form of business

The phrase 'in the form of a business' is broad and has as its foundation the longstanding concept of a business. The definition clearly includes a business and the use of the phrase 'in the form of' indicates a wider meaning than the word 'business' on its own. (paragraphs 170 and 170B of MT 2006/1)

As the definition of 'business' in the GST Act is the same as the definition of 'business' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) and section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997), it can be interpreted similar to income tax. The meaning of business is considered in Taxation Ruling TR 97/11, and although it deals with carrying on a primary production business, the principles discussed in that Ruling apply to any business. (paragraphs 174 to 176 of MT 2006/1)

To determine whether an activity, or series of activities, amounts to a business, the activity needs to be considered against the indicators of a business established by case law. TR 97/11 discusses the main indicators of carrying on a business. Based on that discussion some indicators are:

·         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.

There is no single test to determine whether a business is being carried on. TR 97/11 states at paragraph 12 that 'whilst each case might turn on its own particular facts, the determination of the question is generally the result of a process of weighing all the relevant indicators'. (paragraphs 177 to 179 of MT 2006/1)

In the form of an adventure or concern in the nature of trade

There is no definition of 'in the form of an adventure or concern in the nature of trade' in the GST Act.

Ordinarily, the term 'business' would encompass trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal.

An adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but which has the characteristics of a business deal. Such transactions are of a revenue nature.

Registration

Section 23-5 of the GST Act provides that an entity is required to be registered if:

(a)  the entity is carrying on an enterprise; and

(b)  the entity's GST turnover meets the registration turnover threshold.

Application of the law and ATO view to your case

The entity is not carrying on an enterprise as the activities it carries on are not in the form of business or adventure or concern in the nature of trade. Its activities do not have a commercial purpose and are not done in a business-like manner. The entity does not have an intention to make a profit from its activity. It is merely a private and domestic arrangement undertaken to support certain individuals in their personal lives.

As the entity is not carrying on an enterprise, it is not required to be registered for GST.