Edited version of private advice

Authorisation Number: 1052266005827

Date of advice: 28 June 2024

Ruling

Subject: GST - registrations

Question

Are you, <Entity A>, entitled to be registered for GST pursuant to Division 23 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you enter into an Associate Lease with the company who employs your spouse?

Answer

Yes.

This ruling applies for the following periods:

DDMMYYYY to DDMMYYYY

The scheme commences on:

DDMMYYYY

Relevant facts and circumstances

<Entity A> (You) is not registered nor historically registered for GST.

You are intending to purchase an electric vehicle (the Vehicle).

Following the purchase of the Vehicle you will enter into an Associate Lease Agreement with your spouse and your spouse's employer.

You registered for an Australian Business Number on DDMMYYYY.

It is a condition of the Associate Lease Agreement for the Lessor to have an ABN.

Under the Associate Lease Agreement:

•         There will be 3 parties involved - you, your spouse and your spouse's employer.

•         Your spouse, as the employee, will receive the Vehicle as part of a salary sacrifice arrangement with his employer.

•         Your spouse's employer, as the lessee, will be responsible for making the lease payments (which includes all running costs) to you.

•         You, as the lessor, will be the owner of the Vehicle and receives the lease payments from your spouse's employer.

You currently do not have a draft copy of the Associate Lease Agreement but you will seek to obtain the agreement from a lawyer or legal source to affect this tripartite agreement.

The income you shall receive from this Associate Lease will be less than the GST registration turnover threshold.

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

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

A New Tax System (Goods and Services Tax) Act 1999 subsection 195-1

Reasons for decision

Section 23-5 provides that you are required to be registered for GST if:

(a)  you are carrying on an enterprise; and

(b)  your GST turnover meets the registration turnover threshold (currently $75,000 for entities other than non-profit bodies).

You are not required to be registered for GST if you do not satisfy both of the above criteria.

Enterprise

Section 9-20 defines an enterprise to include, among other things, an activity or series of activities done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property.

Furthermore, Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) provides the Commissioner's view on the meaning of enterprise for ABN purposes.

Paragraph 1 of Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GSTD 2006/6) provides that the principles in MT 2006/1 are considered to apply equally to the term 'enterprise' as used in the GST Act and can be relied upon for GST purposes.

The term 'carrying on' an enterprise is defined in section 195-1 to include doing anything in the course of the commencement or termination of the enterprise.

Paragraphs 303 to 305 of MT 2006/1 discuss the indicators of an enterprise in the form of a lease, licence or other grant of an interest in property:

In the form of a lease, licence or other grant of an interest in property as an enterprise

303. Paragraph 9-20(1)(c) of the GST Act includes in the definition of an 'enterprise', 'an activity, or a series of activities, done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property'. The paragraph does not cover trading in the assets but rather the activity of a lessor or grantor of the interest in the property.

304. The term 'property' covers all types of property. It includes tangible assets such as land, cars and boats. It also includes intangible assets such as copyright and patents.

305. The Commissioner does not believe that, in any practical sense, 'in the form of a lease, licence or other grant of an interest in property' is wider than 'a lease, licence or other grant of an interest in property'. The phrase 'in the form of' does not broaden the meaning of 'lease, licence or other grant of an interest property'. This is because leases and licences are longstanding, well understood legal concepts. In addition the terms 'lease, licence or other grant of an interest in property' encompass all activities that are directed to the exploitation of property rights. Further expansion of these concepts is unnecessary as the phrase 'other grant of an interest' is a broad term that covers interests in property that are not a lease or licence.

Paragraph 306 of MT 2006/1 provides that to be an enterprise in the form of a lease, licence or other grant of an interest in property, it must be done on a regular and continuous basis. The grant need not be done on both a regular and a continuous basis. An activity will be 'continuous' if there is no significant cessation or interruption to the activity.

In your case, you will be carrying on a leasing enterprise when you lease the Vehicle to your spouse's employer under the Associate Lease Agreement. As such, paragraph 23-5(a) will be satisfied.

GST Turnover

In this case, given it is a fact that your turnover from the Associate Lease will be below $75,000 annually, paragraph 23-5(b) is not satisfied.

Therefore, you are not required to register for GST pursuant to section 23-5.

May you register for GST?

As stated above, you are not required to be registered for GST however, section 23-10 provides that you may choose to register for GST if you are carrying on an enterprise regardless of your GST turnover. If you choose to register for GST, generally you must stay registered for a period of at least 12 months.

Conclusion

Given the facts of this case that your GST turnover is below the registration turnover threshold, you may voluntarily register for GST in accordance with section 23-10. Should you choose to do so, generally you will need to stay registered for a period of at least 12 months.

If you do not voluntarily register and at some point your GST turnover reaches the $75,000 threshold, you will be required to register for GST.