In Cronan and Commissioner of Taxation [2014] AATA 745 the Tribunal has found that the ebay activities of the applicant were sufficient to constitute an enterprise and that the applicant was liable for GST (and also for income tax).

The decision is a reminder for those persons who transact with any sort of regularity on a site such as ebay, as reflected in the following observations of the Tribunal:

It seems the Applicant has misunderstood the legal position in regard to his circumstances. In particular the Applicant has allowed the situation regarding his eBay activities to proceed without giving proper consideration as to whether he is subject to income tax with respect to the profits on his trading and GST on his sales.

These are fundamental matters which anyone who transacts with even a small degree of regularity must turn their minds to.

In determining whether the applicant was carrying on an enterprise, the Tribunal considered the following “critical factors”:

• the applicant had a clear commercial objective to make a profit
• it could not be said that the trading activities could have had the character of a recreational pursuit or hobby
• the contention that the applicant lost money on many items sold does not preclude a finding that he was engaged in carrying on a business
• that he did not pay “wholesale” prices afforded to dealers does not require that he was not carrying on a business
• the trading activities were carried on in a commercial or business-like manner
• the trading activities were characterised by repetition and regularity
• the activities were carried out on a commercial scale.

The decision is also a reminder for persons to retain documents and records. In this case, the Commissioner issued default assessments based on industry benchmarks (which the Tribunal observed were second best estimates), but in the absence of contemporaneous records the applicant was unable to show what the actual assessments should be.