Private ruling: Am I in business
Published: August 2014
Ruling period: Income year ended 30 June 2015
Date scheme commenced: Income year ended 1 July 2014

Ruling: Q1: Are you carrying on a business? | A1: No, we consider you are carrying on a hobby | Q2: Are you entitled to an ABN | A2: No

Relevant facts and circumstances: You are retired. In your retirement you plan on a teaching activity. You intend to take on about x students with a maximum of x hours per week. You will charge $x per student, which will result in a maximum of $x per week or $x per year. You are operating from your own home using your own equipment. Your objective is to pass on your knowledge to students of the future generation. You do not wish to charge too much as this excludes keen student from families of a lower income. Your sole income is the aged pension. Your purpose of teaching is to give students a chance of learning and enjoying the activity.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 995 | A New Tax System (Australian Business Number) Act 1999 subsection 8(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-20 (1) | A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20 (2)(b)

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 occupation as an employee'. Taxation Ruling TR 97/11 provides the Commissioner's view of the factors that are considered important in determining if you are in business for tax purposes. The 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 gained. Based on the information you have provided we do not consider that the activity has the necessary characteristics of a business for taxation purposes but rather that of a hobby. Therefore, any income you receive in relation to this activity will not be assessable under section 6-5 of the ITAA 1997 as ordinary income. In addition, any expenses that you incur in relation to this activity will not be deductible. | Detailed Reasoning - Entitlement to an ABN: Section 8(1) of the A New Tax System (Australian Business Number) Act 1999 (the ABN Act) provides that you are entitled to an to have an Australian Business Number (ABN) if you are re carrying on an enterprise in Australia or in the course or furtherance of carrying on an enterprise, you make supplies that are connected to Australia. Section 41 of the ABN Act provides that enterprise is to be given the same meaning as in section 9-20 of the A New Tax system (Goods and Services Tax) Act 1999 (the GST Act). Paragraph 9-20(2)(b) of the GST Act provides that the a private recreation pursuit or hobby are specifically excluded from the definition of an enterprise. Accordingly as we have already determined your activity has the character of a hobby you will not be carrying on an enterprise and therefore not entitled to an ABN.