Private ruling: GST and carrying on an enterprise
Published: July 2012

Ruling: Q1: Are you carrying on an enterprise for goods and services tax (GST) purposes? | A1: No | Q2: Are you entitled to register for GST? | A2: No | Q3: Are you entitled to claim input tax credits (GST credits)? | A3: No | Q4: What is the GST treatment for anything received in relation to the said activities you carry on? | A4: Anything you receive in relation to carrying on the said activities would be outside the scope of the GST system. | Q5: How do you determine the value of non-monetary benefits if required to be reported? | A5: It is not necessary for you to determine the value of non-monetary benefits received from carrying on the said activities as you are not registered for GST.

Relevant facts and circumstances: You are not registered for GST. You are intending to carry out activities in an ad hoc fashion. You are not intending to make a profit from these activities and do not expect anything in return. If you do receive something, it is often non-monetary or personal favours. You are prepared to make some loss if you feel that your help is worthwhile. It gives you personal satisfaction being able to help other people.

Relevant legislative provisions: All references are to the A New Tax System (Goods and Services Tax) Act 1999 : Subsection 9-20(1) | Subsection 9-20(2) | Section 11-5 | Section 25-5

Reasons for decision: Detailed Reasoning - Would you be carrying on an enterprise for GST purposes?: An enterprise for GST purposes in defined in subsection 9-20(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). It includes in the definition an activity, or series of activities, done in the form of a business or in the form of an adventure or concern in the nature of trade (one-off commercial activities). Also, subsection 9-20(2) of the GST Act provides those situations where an enterprise is not being carried on and includes an activity, or series of activities done by an individual without a reasonable expectation of profit or gain or as a private recreational pursuit or hobby. Goods and Services Tax Determination GSTD 2006/6 provides that the Miscellaneous Taxation Ruling MT 2006/1 has equal application to the meaning of 'entity' and 'enterprise' for the purposes of the GST Act. MT 2006/1 (a copy of which has been sent to you) explains what does and doesn't constitute an enterprise. Paragraph 186 of MT 2006/1 provides that while it is always a question of fact and degree in each particular case, it would be difficult to conclude that activities are an enterprise where they are of a very small size and scale, are carried on in an ad hoc manner, and there is little repetition or regularity. Example 21 given in MT 2006/1 illustrates this principal as follows: | Detailed Reasoning - Example 21 - regular small scale activities that do not amount to an enterprise: Geoffrey is a retired electrician who receives the Age Pension. He lives close to the local community hall. Geoffrey enjoys gardening and in summer he volunteers to help out the hall committee by mowing the grounds of the hall and doing light gardening. The hall committee gives Geoffrey approximately $650 per year to help cover his out of pocket expenses. Geoffrey is not entitled to an ABN. Even though there is some regularity to his activities they are carried on in a very small way. The nature and scale of his activities do not amount to an enterprise. Further, he does not have a reasonable expectation of profit or gain… Subsection 9-20(2) of the GST Act and Example 21 make it apparent that it is important the individual has a reasonable expectation of profit or gain from the activities they carry on. Reasonable expectation of a profit or gain is explained in paragraphs 382 to 385 of MT 2006/1 as follows: | Detailed Reasoning - Reasonable expectation of profit or gain: The reasonable expectation of profit or gain is not limited to an expectation for the current year or to specific years and may cover a number of periods. Profits or gains are unlikely in the short term for some activities, such as forestry, but expected over the long term. However, the period to be covered by the test must be relevant to the nature of the activity undertaken. The phrase 'reasonable expectation of profit or gain' is not defined in the ABN Act. However, the phrase 'reasonable expectation' has been considered in a number of cases. In News Corporation Ltd v. National Companies and Securities Commission (1984) 57 ALR 550 at 561; (1984) 5 FCR 88 at 101, Woodward J said 'a reasonable expectation of an event requires more than a possibility, risk or chance of the event occurring'. The test is an objective one. This means that the determination of whether there is a reasonable expectation is not solely based on the subjective view of the individual concerned. It is determined by whether a reasonable person looking at all the circumstances would come to the conclusion that there is a reasonable expectation of profit or gain. The term 'profit or gain' is not defined and consequently it takes its ordinary meaning. It refers to concepts commonly used in the commercial world and can encompass a 'profit or gain' of an income or capital nature . In your case, you are carrying on activities in an ad hoc fashion with no intention to make a profit or gain from these activities and with no expectation of receiving anything in return. In other words, there is no reasonable expectation of a profit or gain from the activities you are carrying on. Hence, under subsection 9-20(2) of the GST Act and following the guidance provided by MT 2006/1, your activities do not constitute an enterprise for GST purposes. | Detailed Reasoning - Would you be allowed to register for GST?: Under section 25-5 of the GST Act, the Commission of Taxation can only register you for GST if he is satisfied you are carrying on an enterprise. As you are not carrying on an enterprise for GST purposes, you would not be entitled to register for GST. | Detailed Reasoning - Would you be allowed to claim input tax credits (GST credits)?: An entity is only entitled to claim GST credits on their creditable acquisitions. Under section 11-5 of the GST Act, an entity can only make a creditable acquisition if they are registered for GST. As you are not entitled to register for GST, you would have no entitlement to claim GST credits on any acquisition you make. What is the GST treatment for anything received in relation to your activities? There are no GST consequences for anything received in relation to the said activities. How do you determine the value of non-monetary benefits if required to be reported? It is not necessary for you to determine the value of non-monetary benefits received from carrying on the said activities as you are not registered for GST.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.