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28 Jun 11 Proposed educational centre not enterprise for GST – Educational Pty Ltd

The Administrative Appeals Tribunal has found that activities undertaken to convert a property into an educational and accommodation centre did not amount to an enterprise, within the definition of “enterprise” in s 9-20(1) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act). Although the expression “carrying on”, as in “carrying on your enterprise”, is defined in s 195-1 of the GST Act as including “...doing anything in the course of the commencement or termination of the enterprise”, the activities in this case amounted to no more than preparation for commencement of a business, not commencement itself.

The taxpayer company had purchased a property intending to convert it into an educational and accommodation centre. During the tax periods in question it outlaid considerable funds in capital and non-capital expenditure, and claimed input tax credits accordingly. Yet it received no payment for the provision of educational facilities. Its minuscule income came from hiring out its premises for a birthday party. No students had been accepted, and no courses offered. The evidence indicated that the venture, although well motivated, lacked commercial character.

The Tribunal was not satisfied that the taxpayer was carrying on an enterprise at the material times. Accordingly, it was not entitled to the input tax credits which it had claimed.

Re Educational Pty Ltd and FCT [2011] AATA 445 (Administrative Appeals Tribunal, Deputy President P E Hack SC, 27 June 2011).