You can claim GST input credits incurred on your investment activities

Historically, the ATO’s view has been that investment activities do not qualify as an enterprise for GST purposes, and therefore, that GST registration and claims for input tax credits are not permitted. It is likely that the ATO still has this view, however, the recent decision in the Federal Court case FCT v Swansea Services Pty Ltd has shown that this view is not necessarily correct.

In this case, the Federal Court has affirmed an earlier tribunal decision that the acquisition of artworks and antiques by a taxpayer constituted the carrying on of an enterprise for GST purposes despite having relatively modest sales. In doing so, the Court rejected the Commissioner's contention that a hobby or an investment activity could not qualify as an enterprise. The taxpayer was therefore entitled to register for GST and claim its associated input tax credits.

The crux of the decision was that the GST Act does not state that an investment activity is not an enterprise, and it does not state that an enterprise must have regular continuous sales. Further, the Court confirmed that the subjective purposes of a taxpayer are also relevant in such cases, and since the taxpayer was conducting its activities in a business-like and commercial manner, with a pre-formulated policy and investment strategy, it was an enterprise.

What does this mean for you? Well, where you carry on an investment activity whether it be antiques and paintings, or whether it be in cars, horses, or other valuable goods, it is possible that you are now entitled to register and can claim your input tax credits, providing you can show the activity is run in a business-like manner.

What next? If you think this may apply to you and would like to discuss whether you can now claim your input tax credits, contact your Grant Thornton advisor for further advice.

For more information, contact:

Krish Patel
Partner - Tax
T +61 2 8297 2400
E krish.patel@au.gt.com