Private ruling: ABN registration, GST registration and entitlement to input tax credits
Published: February 2012

Ruling: Q1: Can a service trust be registered for an ABN and GST in Australia? Is the service trust making a creditable acquisition under section 11-5 of the GST Act, when it acquires a thing, for a creditable purpose, through an inbound tour operator? | A1: Yes, the service trust can be registered for an ABN, but not for GST. No, the service trust is not making a creditable acquisition when it acquires a thing through an inbound tour operator.

Relevant facts and circumstances: An overseas entity is proposing to hold a conference in Australia in 2012. The overseas entity is a non-resident as defined in section 6(1) of the Income Tax Assessment Act 1936; The overseas entity will engage an Australian inbound tour operator (ITO) to plan itineraries for destinations in Australia. The package will include airport transfers, hotel accommodation, car hire, business conference, meals and other services; The overseas entity will pay all travel costs but participants of the event are not required to reimburse travel costs to the entity; The overseas entity will set up a service trust in Australia to manage the event during the activity period; The service trust will register for an ABN and GST in Australia. The operation structure will be best depicted as follows; Service Providers A Trustee Company Australian Inbound Tour Operator (ITO) Event Company Invoice to the Service Trust The Trust for the Conference Beneficiary The trustee company is not yet established, but will be a Pty Ltd company registered under the Corporations Act. You advised in a letter to the Tax Office dated xx February 20xx that: There is no business plan for the new entity. The new entity will be subsidized by the overseas entity. A number of other expenses may be anticipated for the event, including pre-event inspection travelling expenses; supplies and materials for event promotion, business insurance and communication expenses. The new entity is not profit oriented. There will be no employees in Australia. That business records will be maintained by an external accountant. There is no capital investment required. The new entity will cease operating when the event is completely finished. The conference will take place in December 2012. There will be more than 800 people attending the conference. The overseas entity will be the sole beneficiary of the entity and sponsor of the conference. The trustee company has a duty to act in and for the interests of the sole beneficiary of the trust. The trustee company will not be a subsidiary of the overseas entity and they do not have common directors. No agreements have been signed with the Inbound Tour Operator. Key personnel may include representatives from the overseas entity, the Event Company, the Inbound Tour Operator and the Trustee Company. The Event Company is a separate supplier and has no relationship with the Inbound Tour Operator. The entity is established to facilitate the GST reclaim process and to ensure that the conference will be running to comply with Australian rules.

Relevant legislative provisions: A New Tax System (Australian Business Number) Act 1999 Section 8 | Section 41 | A New Tax System (Goods and Services Tax) Act 1999 Section 9-20 | Section 11-5 | Section 23-5 | Section 195-1

Reasons for decision: Detailed Reasoning - ABN Registration: Section 8 of the A New Tax System (Australian Business Number) Act 1999 (ABN Act) states: *You are entitled to have an Australian Business Number (*ABN) if: (a) you are *carrying on an *enterprise in *Australia; or (b) in the course or furtherance of carrying on an enterprise, you make *supplies that are *connected with Australia. (Items marked with an *asterisk are defined in the Dictionary in section 41 of the ABN Act). (1) 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) by the trustee of a fund that is covered by, or by an authority or institution that is covered by, Subdivision 30-B of the Income Tax Assessment Act 1997 and to which deductible gifts can be made; or (da) by a trustee of a *complying superannuation fund or, if there is no trustee of the fund, by a person who manages the fund; or (e) by a charitable institution or by a trustee of a charitable fund; or (f) by a religious institution; or (g) by the Commonwealth, a State or a Territory, or by a body corporate, or corporation sole, established for a public purpose by or under a law of the Commonwealth, a State or a Territory; or (h) by a trustee of a fund covered by item 2 of the table in section 30-15 of the ITAA 1997 or of a fund that would be covered by that item if it had an ABN. Entitlement to an ABN is discussed in 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) at paragraphs 2, 11 and 22, which state: 2. Some entities have an automatic entitlement to an ABN due to the nature of the entity, for example Corporations Act companies (see paragraph 22 of this Ruling). For other entities, for example partnerships, the entitlement to an ABN requires that the entity is carrying on an enterprise. It is these entities that are the relevant entities referred to in this Ruling as being required to carry on an enterprise. 11. Entitlement to be registered for an ABN is not restricted to entities carrying on a business. Some entities such as Corporations Act companies, superannuation funds and government entities are entitled to an ABN. For other entities the entry threshold chosen for the ABN regime is an enterprise test. This test is defined in the legislation and covers a wide range of activities including leasing, and activities done by religious and charitable institutions. Activities done by particular entities are included in the definition of enterprise so that those entities can become registered for ABN and GST purposes and to potentially allow them to obtain input tax credits. 22. All Corporations Act companies are entitled to an ABN. The term 'Corporations Act company' is defined to mean 'a body registered as a company under the Corporations Act 2001 '. Such companies have an Australian Company Number (ACN). Bodies with an Australian Registered Body Number (ARBN) are not Corporations Act companies. (Note: Footnotes have been removed). As you have advised that, should you proceed with this structure, the new entity will be registered under the Corporations Act and it will have an automatic entitlement to an ABN. GST Registration Subsection 23-5(1) 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. (Items marked with an *asterisk are defined in the Dictionary in section 195-1 of the GST Act). An enterprise is defined in section 195 of the GST Act to have the same meaning as section 9-20 of the GST Act. We do not accept that the entity will be conducting an enterprise. 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) advises that MT 2006/1 considers the meaning of the terms 'entity' and 'enterprise' for the purposes of the ABN Act. The ABN Act uses the definitions of these terms that are contained in the GST Act. The principles in MT 2006/1 apply equally to the terms 'entity' and 'enterprise' and can be relied upon for GST purposes. If we apply MT 2006/1 in interpreting the meaning of an enterprise under section 9-20 of the GST Act, we reach the following conclusions: Paragraph 9-20(a) - activities done in the form of a business Paragraph 178 of MT 2006/1 lists a number of business indicators of carrying on a business. Given these indicators as a guide, we are of the view that the trustee will not be conducting a business. The trustee will not be selling goods or supplying services. There is no profit motive. There is no business plan for the entity and the entity is not having an independent source of income directly from its activities. The entity does not have any employees in Australia. Paragraph 9-20(b) - activities done in the form of an adventure or concern in the nature of trade An adventure or concern in the nature of trade is discussed at length in MT 2006/1. Relevantly, paragraphs 233 to 235 of MT 2006/1 state: 233. There is no definition of 'in the form of an adventure or concern in the nature of trade' in the ABN Act. However, the concept of 'an adventure or concern in the nature of trade' has arisen in the context of Australian and United Kingdom (UK) revenue law. While UK law is of assistance in understanding this concept, it is considered that Australian revenue law and judicial decisions should be the starting point to give it meaning. 234. Ordinarily, the term 'business' would encompass trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal. 235. In Australia, there are specific income tax provisions that include in assessable income the profit made from an isolated transaction. These have been developed from earlier provisions that ensured that, 'profit arising from the sale by the taxpayer of any property acquired by him for the purpose of profit-making by sale, or from the carrying on or carrying out of any profit-making undertaking or scheme' was included in a taxpayer's assessable income. We are unable to identify any activity that the Trustee will undertake that will constitute an adventure or concern in the nature of trade either as an isolated transaction which has the characteristics of a business deal or in the form of any profit-making undertaking or scheme. The only activity the Trustee will undertake that we are aware of is paying the ITO or other service providers for the services provided by them to the overseas entity or to the attendees of the conference. This is not 'an adventure, or concern in the nature of trade' in our view. Paragraph 9-20(c) The trustee will not be providing a lease, licence or grant of interest in property. Paragraph 9-20(d) The trustee will not be covered by Subdivision 30-B of the Income Tax Assessment Act 1997, which deals with recipients for deductable gifts. Paragraph 9-20(da) The trustee is not a complying superannuation fund. Paragraph 9-20(e) The trustee is not a charitable institution or a trustee of a charitable fund. Paragraph 9-20(f) The trustee is not a religious institution. Paragraph 9-20(g) The trustee is not a Commonwealth, State or Territory body, nor are you established by a Commonwealth, State or Territory body. Paragraph 9-20(h). The trustee is not the trustee of a fund covered by Item 2 of the table in section 30-15 of the ITAA 1997 (which deals with deductable gifts). On balance, we do not consider that the proposed entity meets the requirements of subsection 9-20(1) of the GST Act and is therefore not entitled to register for GST. | Detailed Reasoning - Question 2: Section 11-5 of the GST Act defines a creditable acquisition as follows: You make a creditable acquisition if: (a) you acquire anything solely or partly for a *creditable purpose; and (b) the supply of the thing to you is a *taxable supply; and (c) you provide, or are liable to provide, *consideration for the supply; and (d) you are *registered, or *required to be registered. As we have already determined that the service trust cannot be registered for GST, it cannot make a creditable acquisition as the requirements of section 11-5 of the GST Act are not met.

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. | Question 1: Can the service trust be registered for an ABN and GST in Australia?