Edited version of private advice

Authorisation Number: 1051994740667

Date of advice: 15 June 2022

Ruling

Subject: Requirement to register for GST

Question 1

Are you required to register for goods and services tax (GST) under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Question 2

Are you permitted to be registered for GST?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Relevant facts and circumstances

There are two co-executors (trustees) of this estate.

An asset of the estate is property which is vacant rural land.

The companies hold a 'petroleum authority' on the land.

You and the Authority Holders entered into a conduct and compensation agreement (CCA) for compensatable effects of carrying out activities on the land.

You also own one additional piece of vacant rural land. The authority holders did not engage in any activities on that additional piece of vacant rural land.

You did not earn income from any other source including from any other property (other than from the CCA with the authority holders)

You are entitled to receive the payments from QGC

The Applicants receive the CCA Payments.

Construction of well pads will be carried out on the land.

You obtained a valuation for the land

You entered into a contract for the sale of the land

You are not registered for GST

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-10

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-15

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

Reasons for decision

Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

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.

Section 23-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

(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

Note: It is the entity that carries on the enterprise that is required to be registered and not the enterprise.

(* denotes a term defined in section 195-1 of the GST Act.)

Therefore, it is necessary to determine whether you carry on an enterprise and satisfy paragraph 23-5(a) or subsection 23-10 of the GST Act.

Carrying on an enterprise

The term enterprise under the GST Act has a wider meaning than business. Subsection 9-20(1) of the GST Act defines what constitute an enterprise and states:

An enterprise is 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; or

c)    on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property; or

d)    .......

Paragraphs 177 to 179 of MT 2006/1 provide guidance on the meaning of business. They state:

177. 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.

178. 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.

179. There is no single test to determine whether a business is being carried on. Paragraph 12 of TR 97/11 states 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'. TR 97/11 can be referred to for a fuller discussion on whether a particular activity constitutes the carrying on of a business.

You are not carrying on an enterprise because the sale of the vacant land does not constitute as running a business.

Section 188-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

Whether your GST turnover meets, or does not exceed, a turnover threshold

(1) You have a GST turnover that meets a particular * turnover threshold if

(a) your • current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your * projected GST turnover is below the turnover threshold; or

(b)your projected GST turnover is at or above the turnover threshold.

Current GST turnover is defined in section 188-15 of the GST Act as the sum of the values of all supplies made in a particular month and the preceding 11 months and does not include supplies that are input taxed. Under paragraph 188-15(1)(c) current GST turnover does not include supplies that are not made in connection with an enterprise you carry on.

Projected GST turnover is defined in section 188-20 of the GST Act as the sum of the values of all supplies made in a particular month and the following 11 months. Under paragraph 188-20(1)(c) projected GST turnover does not include supplies that are not made in connection with an enterprise you carry on.

Therefore, as you are not making any supplies in connection with an enterprise you carry on, your GST turnover does not meet the required threshold to be required to be registered for GST. Further, as you are not carrying on an enterprise you are not required to be registered for GST, nor can you choose to be registered for GST.