The AAT has held a taxpayer was not carrying on an enterprise in relation to the purchase of a property. In addition, it also held that the property purchased was not “commercial residential premises” under s 195-1 of the GST Act. Accordingly, it affirmed the Commissioner’s disallowance of input tax credits in relation to the purchase of the property.
The taxpayer was the nominee and bare trustee of a joint venture trust, and in its capacity as trustee, purchased a property in 2003 for $4.27m including GST. The taxpayer then claimed input tax credits in relation to the purchase. The property was used as residential pensioner accommodation before the purchase and continued to be used for that purpose after the purchase. Overall, the case involved 4 GST issues arising from the purchase of the property, 2 of which have already been dealt with in a previous decision.
In the current proceedings, the Tribunal considered the 2 remaining issues – whether the taxpayer was carrying on an enterprise, and whether the property purchased was “commercial residential premises”. Based on the evidence provided, the Tribunal concluded that the taxpayer was not carrying on an enterprise when it purchased the property in 2003. It said that the constituting documents created in 2003 along with the initial evidence provided by the taxpayer’s representative made it clear that the management and leasing of the accommodation complex would be undertaken by the joint venturers and not the taxpayer. Having decided that the taxpayer was not carrying on an enterprise and hence not entitled to the input tax credits claimed, the Tribunal also considered the “commercial residential premises” issue for completeness.
The Tribunal said there were factors which when taken together were “quite out of place in the context of hotels, motels, inns, hostels and boarding houses, or premises similar to them [ie commercial residential premises under s 195-1]. Their presence renders it impossible to conclude that the property is, or at any relevant time was, commercial residential premises”. Some of the factors included the possibility of keeping pets, allowing alterations to the units, and the occupants having to separately arrange and pay for telephone, electricity and gas. In conclusion, the Tribunal held that the taxpayer was not carrying on an enterprise and the property purchased was not “commercial residential premises” and affirmed the Commissioner’s disallowance of input tax credits in relation to the property.
(AAT Case [2012] AATA 616, Re Wynnum Holdings No 1 Pty Ltd & Ors and FCT, AAT, Ref Nos 2008/8986; 2011/5618, Frost DP, 14 September 2011.)
[LTN 180, 17/9]