Private ruling: Am I in business
Published: March 2013
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2013

Ruling: Q1: Is your investment management activity considered a business? | A1: Yes.

Relevant facts and circumstances: You commenced your investment activities a number of years ago. Your capital invested total multiple million dollars. Your funds are distributed over a range of investments taking into account security and profitability. You regularly re-evaluate your targets, performance and investment strategies (weekly/monthly/yearly). You attend monthly finance meetings in order to discuss the current economic outlook and alternative investment options. You have spread your investments over a number of different areas. A diary which you have kept of your activities indicates that you spend a large amount of your time working on the activity. You employ qualified professionals as required. You have a business plan.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 995-1.

Reasons for decision: Summary: Section 995-1 of the 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 particular facts. The Australian Taxation Office has issued Taxation Ruling TR 97/11 'Income tax: Am I carrying on a business of primary production?' that incorporates the general indicia. TR 97/11 is of general application. Its principles are not restricted to questions of whether a primary production business is being carried on. In the Commissioner's view, the factors that are considered important in determining whether a business activity is being carried on 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. | Detailed Reasoning - Application to your circumstances: The nature of the investments in your portfolio are diverse, the size of which requires a significant amount of time and resource to manage. The activity has a significant commercial purpose, as you conduct the activity systematically and regularly, with features of continuity and system. You research your investments regularly to maximise earning potential, and all investments are planned and organised in a businesslike manner with the purpose of maximising profits. Further the size and scale of your investments are considered to be in the nature of an activity that is being carried on as a business. Having regard to the commercial purpose and scale of the activity, the amount of time and capital invested and the obvious profit motive for undertaking the activity, it is clearly your intention to engage in business. Therefore we consider that the activity is a business for income tax purposes.