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The Federal Court (McKerracher J) has dismissed the Commissioner's appeal from a decision of the AAT, which had held that a corporate taxpayer was at all relevant times carrying on an “enterprise” for the purposes of s 9-20 of the GST Act, and was thus entitled to be registered for GST under s 23-10(1) of the GST Act.

Over several years the taxpayer (Swansea) accumulated a valuable collection of artwork and antiques. It treated those acquisitions as "creditable acquisitions" for the purposes of s 11-5 of the GST Act. They therefore attracted "input credits" pursuant to s 11-20. The Commissioner cancelled Swansea’s registration under the GST Act on the basis that it was not carrying on an enterprise. The Commissioner argued that Swansea was not conducting an enterprise. Rather, it was simply a vehicle for carrying out the hobby of its sole director or, alternatively, was simply accumulating assets as an investment, but without disposing of them. Compared with the value and number of acquisitions over the years, the value and number of sales were very small.

The AAT expressly concluded that the purpose of Swansea acquiring the assets was to eventually sell them at a profit. The Commissioner argued that such a conclusion of fact was not open at all on the evidence and that to take into account the subjective intention expressed by Swansea’s director was inappropriate.

The Court held that it was open for the AAT to take into account the entirety of the transactional history together with explanations regarding that history, its context and statements (both contemporaneously with the events in question and in the hearing) as to the corporate objective. In any event, the conclusion that it reached was open to it with or without the subjective evidence of purpose. As there was a reasonable basis for the factual finding reached, and no other error is demonstrated, the conclusion should not be disturbed. The Court also held that the argument that the finding could not possibly be open on the evidence, that is, that there was no evidence at all to support the finding, could not be accepted: FCT v Swansea Services Pty Ltd [2009] FCA 402 (Federal Court, McKerracher J, 24 April 2009).

For a copy of the decision, go here.

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