Issue
In accordance with paragraph 25-10(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), can the entity, an individual, have the date specified on its application as the effective date of its goods and services tax (GST) registration, when this is the date that the entity first started to incur costs in relation to the purchase of a commercial property that it will lease?
Decision
Yes, in accordance with paragraph 25-10(1)(b) of the GST Act, the entity can have the date specified on its application as the effective date of its GST registration, when this is the date that the entity first started to incur costs in relation to the purchase of a commercial property that it will lease.
Facts
The entity is an individual. The entity is purchasing a commercial property with the intention of leasing the premises to prospective tenants. The entity has incurred a number of costs, such as legal and building inspection fees, in relation to purchasing the property. Leasing out the premises will be the main activity that the entity conducts in carrying on its enterprise.
The entity's turnover is below the registration turnover threshold.
The entity has applied to register for GST. The entity has specified the date that it first started to incur these costs as the effective date of its GST registration.
Reasons for Decision
Paragraph 25-10(1)(b) of the GST Act provides that if an entity has applied for registration and it is carrying on an enterprise, the date of effect for that registration must not be a day before: • the day specified in the application; or • where the Commissioner is satisfied that the entity is required to be registered, the date of effect is the date that the entity became required to be registered, if that is an earlier date to that specified in the application.
The entity's turnover is below the registration turnover threshold. As such, the entity is not required to be registered for GST and the second limb of paragraph 25-10(1)(b) of the GST Act is not applicable in determining the effective date of the entity's GST registration.
The first limb of paragraph 25-10(b)(1) of the GST Act provides that the effective date of that registration must not be a day before the day specified in the application. The entity has applied for registration and specified the effective date for its GST registration as the date it first started to incur costs. Therefore, this date can be the effective date of the entity's GST registration provided the entity is entitled to be registered for GST on and from that day.
Section 23-10 of the GST Act sets out the conditions under which an entity may choose to register for GST. The section requires an entity to be carrying on or intending to carry on an enterprise to be entitled to register for GST purposes.
Section 195-1 of the GST Act provides that carrying on an enterprise includes doing anything in the course of the commencement or termination of the enterprise. In addition, paragraph 9-20(1)(c) of the GST Act provides that an enterprise is an activity, or series of activities, done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property.
The entity is purchasing a commercial property with the intention of conducting an enterprise of leasing the property to prospective tenants. In the course of commencing the enterprise the entity has acquired services and incurred a number of costs, such as legal and building inspection fees, in relation to the purchase of this property. For GST purposes, these acquisitions are part of the carrying on of the enterprise by the entity. Consequently, the entity meets the requirements to choose to register for GST from the time that they start acquiring services and incurring costs associated with the purchase of the property.
In accordance with paragraph 25-10(1)(b) of the GST Act, the entity can have the date specified on its application as the effective date of its registration, when this is the date that the entity commenced carrying on its enterprise.