Private ruling: Am I in business?
Published: July 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1:  | A1: 

Relevant facts and circumstances: You retired from full time employment in the 20XX-XX financial year. At the time you had no intention of returning to work. In the 20XX-XX financial year a relative asked you to do some photography work as part of his business. Your relative made a payment to you as a result of your success and to cover your expenses. In the 20XX-XX financial year you were approached by an unrelated party to do similar work. You will be charging a significant amount and will provide tax invoices for your work. You have applied for an ABN and will register for GST.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5

Reasons for decision: Summary: If a taxpayer is carrying on a business, income from that business is generally assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). Likewise, any expenses incurred in carrying on a business are generally allowable as deductions under section 8-1 of the ITAA 1997, provided that the expenses are not capital, private or domestic in nature. The term business is defined in subsection 995-1(1) of the ITAA 1997 to include any profession, trade, employment, vocation or calling, but does not include occupation as an employee. Taxation Ruling TR 97/11 discusses the indicators to be considered when determining whether a business is being carried on. These indicators 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 a repetition and regularity of the activity; · whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business; · whether the activity is planned, organised and carried on in a businesslike manner such that it is directed at making a profit; · the size, scale and permanency of the activity; and · whether the activity is better described as a hobby, form of recreation or a sporting activity. | Detailed Reasoning - Your situation: You undertook two to three hours per week of photography work for your relative's business. As a result of your success you have since been approached by another business. We do not consider that you were carrying on a business whilst carrying out work for your relative as you lacked intention, lacked a profit making motive (indeed the only payment you received was unsolicited) and your activities were not of a sufficient scale. When you agreed to undertake further photography work, obtaining an ABN, issuing invoices and registering for GST your activities took on a commercial flavour sufficient to be considered to be carrying on a business.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Subject: Am I in business?: Question: Are you carrying on a business in the 20XX-XX financial year?