Private ruling: Am I in business
Date of advice: 1 July 2015
Published: July 2015
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you carrying on a business for tax purposes? | A1: No.

Relevant facts and circumstances: Since June 20XX you have been in receipt of income protection payments due to an injury you sustained. Prior to your injury, you ran a sole trader business. Since your injury, you have been unable to perform these activities. The injury has required several operations and you have been classified as having a Total Permanent Disability by your Superannuation Fund. You have been advised that due to your injury, you will never be able to work again.

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

Reasons for decision: Detailed Reasoning - Carrying on a business: 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'. The case of Evans v. Federal Commissioner of Taxation 89 ACT 4540; (1989) 20 ATR 922 stated 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 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. To be carrying on a business, a taxpayer must be involved in the activities that make up that business. This would be evidenced by an element of control over, and/or an ongoing participation in, the business. The involvement should be direct or immediate, rather than passive. In your case, you have been unable to perform the activities that made up your business since your injury. As there have been no activities performed since your injury, it is considered that you are not carrying on a business for tax purposes since that time.