In Guru 4U and Commissioner of Taxation [2014] AATA 740 the Tribunal has found that the applicant was not carrying on an enterprise. The Tribunal found that the taxpayer had intended to start an enterprise but had not yet done so. Accordingly, the Commissioner was required to cancel its GST registration and it was not liable to pay GST and not entitled to input tax credits.

The applicant contended that its main business activity was “lifestyle counselling and advisory services”. The applicant was incorporated on 25 November 2010 and it lodged BASs for the quarterly tax periods from October-December 2010 to April-June 2012. Each of the BASs claimed input tax credits and three reported a liability for GST, although in each case the applicant was in a refund position. In total the Commissioner paid refunds of $9,678 to the applicant.

The Tribunal found that the applicant was a corporate vehicle set up by its controller for his family to conduct activities in the future, but that it had not yet started to do so. Further, any activities during the relevant period were conducted by the controller personally. The Tribunal was also not satisfied that the applicant had made the acquisitions claimed, and that the mere assertion that administration services were provided is not persuasive, in the absence of independent evidence.

In finding that the applicant was not carrying on an enterprise, the Tribunal observed that the commencement of the enterprise is not necessarily the same thing as taking a step in preparation for such commencement: referring to Russell v Federal Commissioner of Taxation [2011] FCAFC 10; (2011) 190 FCR 449 at 465, [71]. The Tribunal also observed that the intention of the taxpayer is a relevant, but not determinative, consideration.

The Tribunal concluded as follows (at [72]-[73]):

It is plain from the above findings that the Company intends to carry on an enterprise in the future when the family members are ready. It is also the case that some initial steps have been taken in the Relevant Period…to prepare the Company for the commencement of activities, but they are very preliminary.

I have concluded that the promotional activities undertaken in the Relevant Period, including the uploading of a video on a YouTube channel about the Company’s plans and the establishment of a website, did not demonstrate that these steps were done “in the course of the commencement … of the enterprise”, which is the expanded meaning of enterprise by virtue of the definition of “carrying on” in s 195-1 of the GST Act. They were merely preparatory steps to advertise and showcase Guru 4U, and the enterprise had not commenced by June 2012.