ATO ID 2010/197: GST and agricultural managed investment scheme - investor carrying on an enterprise
Date of decision: 26 October 2010
Business line: Indirect Tax

Issue
Is the entity, an individual who is a participant in an agricultural managed investment scheme, carrying on an enterprise under section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision
Yes. The individual who is a participant in the agricultural managed investment scheme is carrying on an enterprise under section 9-20 of the GST Act.

Facts
The scheme: Investors become participants in the scheme by entering into the scheme constitution and associated agreements with the responsible entity. The constitution provides the responsible entity of the scheme is to be appointed as manager of the scheme ('the manager'). The scheme agreements relevantly provide that: The management fees and the lease payments are the only payments made by the participant.

Reasons for decision
Summary: An entity may be registered for GST if it is carrying on an enterprise. 'Enterprise' is defined in section 9-20 of the GST Act. Paragraph 9-20(1)(a) of the GST Act provides that enterprise includes an activity, or series of activities, done in the form of a business. 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) explains the Commissioner's views on when an entity is carrying on an enterprise for the purposes of section 9-20 of the GST Act. Paragraph 159 of MT 2006/1 states that whether or not an activity, or series of activities amounts to an enterprise is a question of fact and degree, having regard to all of the circumstances of the case. Paragraph 160 of MT 2006/1 states it is therefore important that the relevant activity or series of activities are identified in order to determine whether an enterprise is being carried on. Paragraph 170 of MT 2006/1 states (amongst other things) the phrase 'in the form of a business' is broad and has as its foundation the longstanding concept of a business. MT 2006/1 further states at paragraphs 175 and 176: 175. The definition 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 ITAA 1997. 176. As the definition of 'business' is identical in the GST Act and the ITAAs, it can be interpreted in a similar way. The meaning of 'business' is considered in Taxation Ruling TR 97/11. Although TR 97/11 deals with carrying on a primary production business, the principles discussed in that Ruling apply to any business. Paragraph 178 of MT 2006/1 sets out the indicia of business referred to in paragraph 13 of TR97/11 as follows: The Commission's Decision Impact Statement for Hance v Federal Commissioner of Taxation ; Hanneberry v. Federal Commissioner of Taxation 2008 ATC 20-085, (2008) 74 ATR 644 states: ... [the] retention of ownership by individual members, of the produce of the scheme, was of critical importance in this matter, and it will be necessary to ensure that this feature is present in order to reach the same conclusion as that reached by the Court. Having regard to the indicia listed above, and the essential feature that the Decision Impact Statement states must be present (before the Commissioner will conclude the participants in such schemes are carrying on a business), we conclude each participant is carrying on a business. Specifically, we consider the relevant features of the scheme are: Therefore the participant, in carrying out activities in the form of a business, will be carrying on an enterprise, unless those activities fall into the exclusions listed under subsection 9-20(2) of the GST Act. In this case, none of the activities carried out by the participant fall into the exceptions listed under subsection 9-20(2) of the GST Act. Therefore, the participant is carrying on an enterprise under section 9-20 of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-20 subsection 9-20(2) paragraph 9-20(2)(a)
Case references: Hance v Federal Commissioner of Taxation Hanneberry v Federal Commissioner of Taxation 2008 ATC 20-085 (2008) 74 ATR 644
Related public rulings and determinations: Miscellaneous Taxation Ruling MT 2006/1 | Taxation Ruling TR 97/11
Related ATO interpretative decisions: ATO ID 2010/129 | ATO ID 2010/196 | ATO ID 2010/198 | ATO ID 2010/199
Subject references: Goods and services tax GST enterprise