A taxpayer intending to establish an educational academy has been unsuccessful in convincing the AAT that it carried on an enterprise for GST purposes: AAT Case [2011] AATA 445, Re Educational Pty Ltd and FCT (AAT, Ref No: 2010/5166, Hack DP, 27 June 2011).

Background

The taxpayer had purchased a rundown property in Queensland in 2003 and had intended to convert it into an educational and accommodation centre. It registered for GST before completion of the purchase and between 1 October 2005 and 30 June 2009 claimed input tax credits in excess of $30,000, while reporting taxable supplies of some $6,000. The Commissioner conducted an audit and concluded that the taxpayer was not carrying on an enterprise (and so was not entitled to claim the input tax credits).

The taxpayer sought a review of the Commissioner's objection decision, arguing that it was carrying on an enterprise in accordance with the definitions in ss 9-20(1) and 195-1 of the GST Act.

Decision

The AAT was not satisfied that the taxpayer engaged in activities that were done in the form of a business and it affirmed the objection decision.

Factors relevant to the AAT's decision included: no students had been accepted and no courses offered; promotion was undertaken by word of mouth only; no consent had been obtained from the local government authority to provide accommodation; and no payment had been received for the provision of educational facilities (its "miniscule" income had been derived from venue hire for a birthday party).

In the period under review, the taxpayer had expenses in excess of $391,000 but had made no supplies of what it said was its enterprise. It only created its fee structures and business plan after the Commissioner commenced the audit. Overall, although the taxpayer was sincere in its intention to create an educational facility, the AAT found the activities undertaken to progress the claimed enterprise were "desultory".