Private ruling: Am I in business?
Date of advice: 3 February 2020
Published: March 2020
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: Month X 20XX

Ruling: Q1: Do your horse racing and horse breeding activities constitute the running of a business? | A1: No. You do not meet the relevant factors contained in Taxation Rulings TR 97/11 and TR 2008/2. Further information about carrying on a business can be found by searching 'QC 31733' on ato.gov.au.

Relevant facts and circumstances: You established a trust in order to buy racehorses as well as shares in syndicates that hold horses. The horses are trained and bred by a third party who you pay. You entered into this arrangement with the intention of making a profit from racing and of selling the horses but you are also doing it due to your love of racehorses. You have purchased a number of horses. For the financial year ended 30 June 20XX, your expenses were $X while your income was $X. For the financial year ended 30 June 20XX, your expenses were $X while your income was $X. For the current financial year so far your expenses were $X while your income was $X. Since Month X 20XX, you have sold X weanlings, X mares, X ready to run yearlings and X racehorses. You have no prior experience in the horse breeding industry. You had part shares in racehorses as a hobby prior to establishment of the trust. You sell horses by taking them to auction or by selling privately. You find horses by going to sale yards and getting involved with other businesses to try and partner with them. You go to the tracks in the early mornings occasionally. You currently engage a number of horse trainers. Horse racing comprises about X% of your activities and breeding comprises about X%.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 8-1 Further issues for you to consider | Future years | You should note that conducting an activity that has been described as a hobby is a 'status'. You can change from conducting an activity as a hobby to that of being in business and vice-versa over time as your level of activity changes. Therefore you should evaluate your level of activity on a regular basis to see whether you are conducting a hobby or carrying on a business.