Private ruling: Am I in business
Published: March 2015
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you carrying on a business for taxation purposes? | A1: Yes.


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

Reasons for decision: Summary: Business is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to be 'any profession, trade, employment, vocation or calling, but does not include 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. Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? outlines some factors that indicate whether or not a business of primary production is being carried on. No individual factor is determinative, but should be weighed up in conjunction with the other factors. In the Commissioner's view, the factors that are considered important in determining the question of business activity 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. TR 97/11 states the indicators must be considered in combination and as a whole and whether a business is being carried on depends on the 'large or general impression gained' ( Martin v. FC of T (1953) 90 CLR 470 at 474; 5 AITR 548 at 551) from looking at all the indicators, and whether these factors provide the operations with a 'commercial flavour' ( Ferguson v. FC of T (1979) 37 FLR 310 at 325; 79 ATC 4261 at 4271; (1979) 9 ATR 873 at 884). However, the weighting to be given to each indicator may vary from case to case, and no one indicator will be decisive ( Evans v. FC of T 89 ATC 4540; (1989) 20 ATR 922). In your case, there is regularity and repetition in your activities and considerable time is spent on your activities each week. Although you don't have a business plan, there is an intention to make a profit and you keep records of your transactions. You are a member of various associations and your activities are organised and carried out in a business like manner. After weighing up the relative business indicators and objective facts surrounding your case it is considered that you are carrying on a business for taxation purposes.

You spend time training the stock. | The stock is then sold for a profit. | You have made a profit in most of the past years on your activities. | In each of the past several years, your gross income has been in the tens of thousands of dollars. | You have no formal qualifications, however you have many years experience in your work. | You are a member of various and relevant associations. | You don't formally advertise your stock. The stock are sold locally. | You don't have a business plan or budget. | You keep records of all your purchases and expenses. | You spend more than 20 hours each week on your activities. | You intend to continue in these activities.