ATO ID 2002/793: Assessable Income: GST received by an unregistered business
Date of decision: 3 July 2002
Year of income: Year ended 30 June 2001
Business line: Private Groups and High Wealth Individuals

Issue
Is a taxpayer, who carries on a business but is not registered nor required to be registered for the goods and services tax (GST), required to include an amount collected as GST on behalf of the taxpayer, as assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes, the taxpayer, who carries on a business but is not registered nor required to be registered for the GST, is required to include an amount collected as GST on behalf of the taxpayer, as assessable income under subsection 6-5(1) of the ITAA 1997 as it is an amount received from a transaction carried out in the ordinary course of business.

Facts
The taxpayer carries on a business. The business is not registered nor required to be registered for GST. The business sold some stock through a third party on a consignment basis. The third party collected an amount as GST when the stock was sold and forwarded this amount to the taxpayer as part of the proceeds from the sale of the stock.

Reasons for decision
Summary: Subsection 6-5(1) of the ITAA 1997 includes income according to ordinary concepts, which is called ordinary income, as assessable income. Amounts received from transactions carried out in the ordinary course of business, such as the proceeds from the sale of trading stock (which includes goods on consignment), are normally considered to be ordinary income. Paragraph 17-5(a) of the ITAA 1997, however, states that an amount is not assessable income to the extent that it includes an amount relating to GST payable on a taxable supply. As the taxpayer is not registered nor required to be registered for GST, the taxpayer is not making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). As such, there is no GST payable on a taxable supply for the purposes of paragraph 17-5(a) of the ITAA 1997. The additional amount received by the taxpayer as GST is required to be included as assessable income under subsection 6-5(1) of the ITAA 1997 as it is an amount received from a transaction carried out in the ordinary course of business and is not excluded from assessable income under paragraph 17-5(a) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(1) paragraph 17-5(a)
Subject references: Goods and services tax GST registration Taxable supply Income Goods on consignment Trading stock