The most contentious area of horse taxation is whether the breeding and/or racing activity is an income tax “business” or GST “enterprise”. This is so as many people register themselves or related entities (e.g. companies) for GST when they are clearly ineligible “hobbyists” and not a proper GST “business”. If on an ATO audit this is found to be the case, the GST registration is revoked, refunds clawed back and hefty penalties often result, not to mention the potential ongoing scrutiny that may result in relation to the rest of the person’s tax affairs. Ouch!

Accordingly, when our office finds out that the ATO are conducting a special audit project on ABN/GST registrations, we get it out there as soon as possible.

By way of background, The Australian Business Register (ABR) receives around 80,000 ABN registrations applications a month. Around 91% of these applications result in registrations being issued on the spot, and the main reason ABNs are not issued for the others is a failure to establish the identity of the people behind the business.

The amount of monthly ABN registrations is high and the ATO want to ensure they are being issued when there is a proper entitlement, i.e. a “business” is being conducted.

The ATO have worked with the Australian Bureau of Statistics to pick a representative sample of around 1,400 recently issued ABNs so that they can review their ABN entitlement. These reviews will inform future focus areas to reduce the number of people applying for and receiving ABNs when they are not entitled.

The reviews will focus on ABNs issued for individuals, partnerships and trusts in August and October 2016. If you applied for an ABN via your Accountants during this period, they may be contacted and required to provide evidence that you are running a business or taken steps to start a business.

I think it’s reasonable to speculate that if the ATO find many wrong registrations during this review, their audit activity will escalate in this area.

The message is clear – if you’ve registered a horse related business recently, or about to register, make sure you seek proper advice as to the “business” status of your activities!

Please contact me if you wish for me to clarify or expand on any of the matters raised in this article.


Any reader intending to apply the information in this article to practical circumstances should independently verify their interpretation and the information’s applicability to their particular circumstances with an accountant specialising in this area.

End of release.

Prepared by:

Paul Carrazzo CPA
Carrazzo Consulting CPAs

801 Glenferrie Road, Hawthorn, VIC, 3122

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