Private ruling: Business
Published: July 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Am I in business? | A1: Yes.

Relevant facts and circumstances: You were incorporated in mm/yyyy. Prior to incorporation your representative competed in a number of events across Australia and overseas countries from mm/yyyy and achieved reasonable success securing media attention, multiple successful finishes and a national championship. Your representative is also part of a well-established overseas team and performs there. This exposure ensures your marketability to prospective sponsors. The majority of your income comes from sponsorships, tours and safety initiatives and intend to expand your revenue source to web based television advertising, branded merchandise and documentaries. You employ media professionals to increase your exposure to potential sponsorship opportunities including your website and using social media. You intend to complete in a prestigious overseas series over two years from 20XX where your exposure will be increased. You expect to make a profit from the 20YY financial year with a decrease in the profit between 20YY and 20ZZ financial years due to increased fees as you work to increase your profile through more events. The business is operated in a commercial manner and its purpose is solely focused on attracting sponsors. You are engaged full time in promoting your brand and you engage specific people to provide professional public relations and media coverage.


Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines 'business' as including any profession, trade, employment, vocation or calling, but not an 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 provided. Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? provides the Commissioner's view on the factors used to determine if you are in business for tax purposes. These factors 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. The large and general impression gained after examining the activity in the light of all of the business indicators and the relevant case law is that your activity amounts to the carrying on of a business. In summary, this is because: • your intention is to make a profit and you genuinely believe that a profit will be made. • your activity has a significant commercial purpose. • there is repetition and regularity. • the business methods and procedures are of a type ordinarily used in other businesses. • the activity is arranged in a business-like manner. • the scale of the activity will be potentially commercially viable.