Private ruling: Business v hobby
Published: November 2014
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you carrying on a business? | A1: No

Relevant facts and circumstances: You are a member of a group. The group offers paid services approximately once a month. You split the payment between group members once the expenses have been covered. Each group member would each have their own additional individual expenses. You had been advised by the venues where you provide your services that they would require an ABN. Accordingly you obtained an ABN in your own name on behalf of the group. You have other full time employment.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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'. In Evans v. Federal Commissioner of Taxation 89 ACT 4540; (1989) 20 ATR 922 it was determined that whether or not an activity amounts to carrying on business for taxation purposes is a question of fact. There is no exhaustive or determinative definition which can be applied to determine this matter. Martin v. Federal Commissioner of Taxation (1953) 90 CLR 470; (1953) 10 ATD 226; (1953) 5 AITR 548, however, provides that the test for determining whether or not a business is being carried on is both subjective, which considers the individuals purpose at the relevant time, and objective, which considers the nature and extent of the activities undertaken. Taxation Ruling TR 97/11 provides the Commissioner's view of the factors used to determine if you are in business for tax purposes. 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 business-like 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. | Detailed Reasoning - Application to your circumstances: In your case you are a member of a group that provides paid services approximately once a month. You have other full time employment. Taking the above factors into account, including the scale on which you are operating, we consider that your activities relating to the group can be better described as 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 have incurred in relation to this activity will not be deductible.

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