GST and joint venture - non-specified purpose

Do the entities, participants in a joint venture, meet the requirements for approval as participants in a GST joint venture under subsection 51-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when the purpose of the joint venture is to manufacture feed products for livestock?

No, the entities do not meet the requirements for approval as participants in a GST joint venture under subsection 51-5(1) of the GST Act when the purpose of the joint venture is to manufacture feed products for livestock.

The entities are participants in a joint venture that manufactures feed products for livestock. The joint venture is not a partnership under section 995-1 of the Income Tax Assessment Act 1997.

The entities jointly apply in the approved form for approval of the joint venture as a GST joint venture. The application nominates one of the entities to be the joint venture operator.

Each entity that participates in the joint venture is a party to a joint venture agreement with all of the participants in the joint venture.

Each entity is registered for goods and services tax (GST) and accounts on the same basis as all of the other entities that participate in the joint venture.

Division 51 of the GST Act allows entities engaged in joint ventures to be approved as GST joint ventures if they meet certain criteria. Subsection 51-5(1) of the GST Act provides that participants in a joint venture will meet the requirements for approval as participants in a GST joint venture if: (a) the joint venture is a joint venture for the exploration or exploitation of mineral deposits, or for a purpose specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations); and (b) the joint venture is not a partnership; and (c) the entities jointly apply, in the approved form, for approval of the joint venture as a GST joint venture; and (d) each of those entities satisfies the participation requirements for that GST joint venture; and (e) the application nominates one of those entities, or another entity, to be the joint venture operator of the joint venture; and (f) if the nominated joint venture operator is not a party to the joint venture agreement, they must still be registered for GST and account on the same basis as the participants.

From the facts, the entities meet the requirements in paragraphs (b), (c), (e) and (f). Furthermore, each entity that participates in the joint venture is a party to a joint venture agreement with all of the other participants in the joint venture; is registered for GST; and accounts on the same basis as all of the other entities that participate in the joint venture (section 51-10 of the GST Act). As such, the entities also meet the requirement in paragraph (d).

Therefore, it needs to be determined whether the requirement in paragraph (a) is also met.

Paragraph 51-5(1)(a) of the GST Act requires the joint venture to be a joint venture for the exploration or exploitation of mineral deposits, or for a purpose specified in the Regulations. In this case, the purpose of the joint venture is to manufacture feed products for livestock, and not for the exploration or exploitation of mineral deposits. As such, it is necessary to determine whether the joint venture is for a purpose that is specified in the Regulations.

Subregulation 51-5.01(1) of the Regulations specifies that, for paragraph 51-5(1)(a) of the GST Act, each of the following is a purpose: (a) research and development; (b) the provision of insurance, other than life insurance; (c) fishing; (d) agriculture; (e) cultivation, or exploitation, of timber; (f) design, or building, or maintenance, of residential or commercial premises; (g) civil engineering, including the design, construction and maintenance of roads, railways, bridges, canals, dams, ports, harbours, airports and similar installations; (h) generation, or transmission, or distribution, of electricity; (i) transmission, or distribution, of water; (j) receipt, or storage, or distribution, of oil and gas products; (k) refining, or processing, of oil and gas products; (l) beneficiation of minerals and primary metal production, including alloy production; (m) charitable activities. (n) transportation

As the purpose of the joint venture is to manufacture feed products, the only specified purpose that may be of relevance is agriculture (sub-subregulation 51-5.01(1)(d) of the Regulations).

Agriculture is not defined in the GST Act or the Regulations, and thus, is given its ordinary meaning. The Macquarie Dictionary (1997) defines agriculture as the cultivation of land, including crop-raising, forestry, stock-raising, etc; farming.

In this case, the purpose of the joint venture is to manufacture feed products for livestock, and not for the cultivation of land or farming. As such, the joint venture is not a joint venture for the purpose of agriculture and the entities do not meet the requirement in paragraph 51-5(1)(a) of the GST Act.

Therefore, the entities do not meet the requirements for approval as participants in a GST joint venture under subsection 51-5(1) of the GST Act. History: This ATO ID was amended on 21 May 2003 to include '(n) transportation' in the list of purposes specified in subregulation 51-5.01(1) of the Regulations. This paragraph was inserted by the A New Tax System (Goods and Services Tax) Amendment Regulation 2003 (No.2) (73 of 2003) and has effect from May 2003.