The AAT has held that a married couple were not a partnership for GST purposes, were not carrying on an enterprise, and were not entitled to input tax credits claimed on various acquisitions, including in relation to a residential building, during the relevant period.

The couple bought a rural property in 2006 and constructed a residential building on the property. The Tribunal heard the couple intended to make the building available for short-term holiday letting. They also intended to grow olive trees on the property for production of table olives and olive oil, and to farm goats. In October 2009, the couple executed a partnership agreement and became registered for GST purposes, initially with a date of effect of 29 September 2009. However, the Tribunal heard that in early 2010, the partnership registration was backdated by the Commissioner at the request of the couple’s accountant to 1 January 2007. The AAT said this was because the couple said they wanted to claim input tax credits for their acquisitions, including in relation to the construction of the residential building.

After an audit, the Commissioner decided the partnership was not entitled to be registered. The Commissioner concluded the couple were not a partnership for GST purposes, were not carrying on an enterprise, and therefore, the input tax credits claimed for the tax periods between 1 January 2007 to 30 June 2010 (the relevant period) were incorrect. The Commissioner issued assessments reversing the credits claimed (around $38,000) and imposed penalties at the rate of 25% for failing to take reasonable care. The taxpayers objected to the assessments but the objections were disallowed.

The Tribunal concluded the Commissioner was correct in disallowing the couple’s objections. It considered the couple were not a partnership for GST purposes during the relevant period (and therefore could not register as a partnership under the GST Act). The Tribunal was also satisfied that, even if it were held the couple were a partnership, they were not carrying on an enterprise. Therefore, it decided the acquisitions made by the couple were not creditable acquisitions as it held they did not acquire things for a creditable purpose. The AAT also affirmed the penalties imposed.

(AAT Case [2013] AATA 888, AAT, Ref Nos: 2011/5071, 2012/2132, Lazanas SM, 13 December 2013.)

[LTN 243, 16/12/13]

About the author