• Service: Tax, Indirect Tax
  • Type: Regulatory update
  • Date: 7/03/2014

Tax Insights

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Phil Renshaw

Phil Renshaw
Partner, Tax

+61 8 9263 7136

When is a partnership "carrying on an enterprise"? 

by Phil Renshaw, Indirect Tax Specialist

In the recent decision in The Married Couple v Commissioner of Taxation [2013] AATA 888, the Administrative Appeals Tribunal (AAT) were asked to rule as to whether the taxpayers, a married couple, were a ‘partnership’ as defined for the purposes of the Goods and Services Tax (GST) Act, during any part of the relevant period. In addition, a determination as to whether the taxpayers were ‘carrying on an enterprise’, within the meaning of s 9-20 of the GST Act was also required.

The purpose of the GST registration was to enable the taxpayers to claim input tax credits in respect of construction costs and other expenditure, for the construction of ‘commercial residential premises’.


The Tribunal found the taxpayers were not a partnership at general law or for GST purposes. The relevant test applied was whether the taxpayers were ‘carrying on business as partners'.


One of the factors indicative of the existence of a partnership is a profit-making purpose, but the AAT highlighted the intention to carry on a business is not determinative that a business is in fact carried on. It is not merely a matter of intention but one of activity. While the activities and the documents reflected the taxpayers planned on forming a partnership, the taxpayers were not carrying on business as partners.


The concept of intention is an interesting one in that the GST law provides that carrying on an enterprise includes activities undertaken ‘in the course of commencement… of the enterprise’. The taxpayers’ activities were ruled to be preliminary or preparatory in nature and lacked commercial character. Even if an enterprise had commenced, paragraph (c) of s 9-20(2) would exclude the activities as they were ‘without a reasonable expectation of profit or gain’.


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