Private ruling: Are you carrying on a business?
Date of advice: 27 October 2017
Published: March 2018
Ruling period: Year ended 30 June 2016. | Year ended 30 June 2017.
Date scheme commenced: 1 July 2015.

Ruling: Q1: Are you carrying on a business of selling plant bulbs? | A1: No.

Relevant facts and circumstances: Some decades ago, you previously produced plants in the course of carrying on a business. You ceased the business due to a lack of interest in the market. After the business ceased, you were left with a large number of bulbs which co-existed among the weeds for number of years. You have recently cleared the patch up where the bulbs are, now that you have some spare time. You are now looking to sell these bulbs. You have created an online listing but have not received any orders within the last month or so. You do not know whether you will receive any income from this activity. You do not intend to keep up any levels of stock or go into production of the bulbs, but want to sell what you currently have. You have a current ABN in relation to another business you ran and are unsure if you need the ABN.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1).

Reasons for decision: Summary: You are not carrying on a business of selling plant bulbs. | Detailed Reasoning - Detailed reasoning: Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'. The question of whether a business is being carried on is a question of fact and degree. The courts have developed a series of indicators that are applied to determine the matter on the facts. Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? provides the Commissioner’s view of the indicators that are taken into account when determining when a taxpayer is carrying on a business of primary production. These indicators are not confined to primary production activities but also are applied to all manner of business activities. The factors considered important are: ● whether the activity has a significant commercial purpose or character ● whether the taxpayer has more than just an intention to engage in business ● whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity ● whether there is regularity and repetition of the activity ● whether the activity is of the same kind and carried on in a similar manner to that of ordinary trade in that line of business ● whether the activity is planned, organised and carried on in a businesslike manner such that it is described as making a profit ● the size, scale and permanency of the activity, and ● whether the activity is better described as a hobby, a form of recreation, or sporting activity. No one indicator is decisive. The indicators must be considered in combination and as a whole. Whether a 'business' is carried on depends on the large or general impression. Application to your situation You are not considered to be carrying on a business in relation to the sale plant bulbs. There is no commercial purpose to your activity and you do not have the intention to engage in business. You do not have a purpose of profit, but are merely attempting to dispose of excess plant bulbs you have. Your activity lacks regularity and repetition, evidenced by the limited sales you have made and the non-production of the bulbs. Overall, in light of your circumstances, the Commissioner’s view is that the sale of your plant bulbs is a recreational pursuit or a hobby. | Detailed Reasoning - Future years: You should note that conducting an activity that has been described as a hobby is a 'status'. You can change from conducting an activity as a hobby to that of being in business and vice-versa over time as your level of activity changes. Therefore you should evaluate your level of activity on a regular basis to see whether you are conducting a hobby or carrying on a business. | Detailed Reasoning - ABN cancellation: As you are not currently carrying on a business you are not entitled to an ABN. Accordingly you will need to cancel your ABN. You can cancel your ABN by calling 13 92 26 between 8.00am and 6.00pm, Monday to Friday. You must be recorded by us as a person authorised to update details on behalf of the business. Alternatively you can complete and return the Application to cancel registration form (NAT 2955) which can be ordered from our website, ato.gov.au .

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