Private ruling: Income tax - Assessable income - Business and professional income - Carrying on a business
Date of advice: 28 August 2018
Published: October 2018
Ruling period: For the financial year ended 30 June 2018 | For the financial year ended 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you in business in relation to your Website activities? | A1: No

Relevant facts and circumstances: You started your Website activity on the internet in early 2010. You began this as a hobby and for fun by posting videos in your spare time. You do not keep any business records. You are employed full-time and earn $xxxx per annum. You commenced being paid by a Search facility for advertisement and online video’s in the financial year ended 30 June 2018. You made $xxxx in the financial year ended 30 June 2018. The revenue is tied to the size of your subscriber base. You have no plan to increase your subscriber base. You expect to earn more money in the financial year ended 30 June 2019 if your subscribers grow. You spend on average three hours per week on your activity, though you do not do it every week. Your Website channel is available for anyone to access. You carry on the activity in your home. You do not have a business plan. You are not engaged in any other business activities. You do not have any qualification or expertise related to Website activities. You do not seek any expert or technical advice. You do not actively advertise your Website channel; all traffic comes from within the platform. Your only expenses are electricity and internet. You use existing equipment. There was no initial outlay. You plan on continuing to upload videos to your Website channel. You expect to continue managing the channel without outsourcing any work.

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 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 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. Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? provides the Commissioner’s view of the indicators that are taken into account when determining when a taxpayer is carrying on a business of primary production. These indicators are not confined to primary production activities but also are applied to all manner of business activities. The factors considered important 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. Application to your situation In your case, you are an enthusiast who has created a Website channel. You state that you began this activity for fun and later started earning small amounts of money. You show a low level of regularity and repetition as you do not post regularly. You have no plans to increase your subscriber base and therefore the size and scale of your Website channel is small scale. Your activity on your Website channel is not planned or organised and is not carried on in a businesslike manner as you spend on average 3 hours per week on the activity. There are times you may not complete any activity on your channel. Upon consideration of the relevant factors, your Website channel activity does not amount to carrying on a business for income tax purposes. As your activities do not amount to that of carrying on a business, the income received will not be assessable income under section 6-5 of the ITAA 1997.