Private ruling: Am I in business
Published: August 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 01 July 2011

Ruling: Q1: Do your activities satisfy the requirements of carrying on a business? | A1: No.

Relevant facts and circumstances: You obtained an ABN for your activities. Your activities involve making and selling items. You setup a website for your activities; however closed it a few months later. You no longer wish to carry out these activities. You have not sold any items for several months. You did not keep any records during the financial year; however estimate that your profit is under $150 for the year.

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

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 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 provides the Commissioner's view of the factors used to determine if you are in business for tax purposes. In the Commissioner's view, the factors that are considered important in determining the question of business activity 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. TR 97/11 states that the indicators must be considered in combination and as a whole and whether a business is being carried on depends on the 'large or general impression gained' from looking at all of the indicators, and whether these factors provide the operations with a 'commercial flavour'. However, the weighting to be given to each indicator may vary from case to case. In your situation, you have been carrying out the activities of making and selling items. Although you may have initially had the intention to engage in a business activity, the mere intention is not indicative that a business is being carried on. Upon reviewing your situation, in particular the size, scale and lack of records, it appears that this activity is better described as a hobby or a form of recreation. Therefore, as you are not considered to be carrying on a business, the money that you have received in relation to this activity will not be assessable. In addition, you are not entitled to claim a deduction for any expenses that you have incurred with regards to this activity.

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.