Private ruling: Am I in business?
Published: October 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you carrying on a business of selling items? | A1: No.

Relevant facts and circumstances: You purchase second hand items. You transport the items to your place of residence and, where required, repair the items to a standard where you can sell it online. You undertake the activity as a pastime that assists you to keep your skills current. The quantity of items bought and sold varies from year to year depending on the replacement program of the place where you purchase them, however, you buy and sell approximately x per year. You earn an amount of profit per year depending on the supply and condition of the items. You spend a few hours per week on this activity, mostly on weekends. You do not have a business plan. You do not keep proper financial records.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(1)

Reasons for decision: Summary: Subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that your assessable income includes income according to ordinary concepts. This means 'ordinary income' includes amongst other things, income from salary and wages and business operations. Taxation Ruling TR 97/11 provides criteria established by the courts that would need to be satisfied in order to be considered to be carrying on a business. It should be noted that TR 97/11 specifically deals with the carrying on of a business of primary production, but the criteria established can be applied to most activities. The list of criteria includes, but is not limited to: · whether the activity has a significant commercial purpose or character · whether there is more than just an intention to carry on a business · whether there is the purpose and prospect of making a profit · whether there is repetition or regularity involved · whether the activity has the same characteristics as other businesses in the same field · whether the activity is carried on in a business-like manner; and · the size and scale of the activity No one indicator is decisive. They should be considered in combination and as a whole. Generally, whether a business is carried on depends on the large or general impression given. | Detailed Reasoning - Application to your circumstances: In your case you have a personal interest in the items. The sale of items is considered to be a hobby or pastime undertaken by you that assists you to keep your skills current. The activity of buying and selling items that you are undertaking has limited commercial character or purpose. You do not have a business plan or operate out of a business premises. You keep limited records of your transactions. In addition the activity is undertaken mostly on weekends from your place of residence. Based on the information you have provided we do not consider that the activity has the necessary characteristics of a business for taxation purposes. Therefore, any income you received in relation to this activity for the year ended 30 June 2013 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.