Private ruling: Am I in Business
Published: September 2012
Ruling period: Year ending 30 June 2012 Year ending 30 June 2013 Year ending 30 June 2014 Year ending 30 June 2015 Year ending 30 June 2016 Year ending 30 June 2017
Date scheme commenced: 1 January 2012

Ruling: Q1: Are you carrying on a business? | A1: No | Q2: Are the non-monetary amounts assessable? | A2: No. | Q3: Is the income received from the activity assessable income? | A3: No. | Q4:  | A4: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5(1). | Income Tax Assessment Act 1997 section 8-1. | Income Tax Assessment Act 1997 section 995-1.

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 'ordinary income' includes amongst other things, income from salary and wages and business operations. Subsection 8-1(1) and (2) of the ITAA 1997 allows you to claim a deduction for a loss or outgoing that is incurred in gaining or producing your assessable income, or necessarily incurred in carrying on a business to gain or produce assessable income. These deductions are limited by the exclusion of losses or outgoings that are capital, private or domestic in nature. Taxation Ruling TR 97/11 provides the types of 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. All of the above factors have been considered in light of your circumstances and the following conclusion has been reached. While you may have the knowledge, experience and skills to undertake the activity, the activity you are undertaking has limited commercial character or purpose. This is supported by the fact that you do not have a business/marketing plan in place; there is no repetition and regularity of any business activities or size and scale to the activity. You indicate your intention is to make a profit; however, this has not been established as there has been no trading activity or business activity. You indicate the nature of your activity is similar to another business entity. However you do not have existing customers, no funding for your activity nor have any sales been undertaken. While you may keep records, it is doubtful from the information provided that the activity you are considering to undertake is being carried on in a systematic, business-like manner. The information provided suggests that the activity is a hobby as it does not have the necessary characteristics of a business for taxation purposes. Therefore, any income you may receive in relation to this activity will not be assessable under section 6-5 of the ITAA 1997 as ordinary income or under any other provision of the tax law. Similarly any non-monetary benefits would also be non- assessable. In addition, any expenses that may be incurred in relation to this activity will not be deductible under section 8-1 of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Question 4: Are the expenses an allowable deduction for this activity? Answer: | Relevant facts: You do not have an Australian Business Number. | You do not have funding for the activity you carry on. | You do not have any business or marketing plan or any existing or potential customers. | The activity has no repetition or regularity. | You may make losses in some periods and profits in others and perhaps no change in position in others. | The activities may create the scenario where liabilities may exceed assets according to taxation reporting rules. | You may or may not carry out activities in a similar manner to that of other businesses in the same or similar industry. Your intention is to be different rather than similar to those entities in the same or similar industry. | There is a purpose of profit as well as a prospect of you making a profit and the activities are not inherently unprofitable. | You presently have no employees. | There is currently a market or potential markets for you. | You have strategies in place to cover expenses incurred. | You keep books of accounts and other records. | You have knowledge, experience and skills in activities carried on by other entities in a similar industry.