Private ruling: Income tax - assessable income - carrying on a business
Date of advice: 13 January 2020
Published: March 2020
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Do your activities in creating and posting videos amount to carrying on a business? | A1: No

Relevant facts and circumstances: You create videos. You run three different platform channels. You started making videos for fun and to help others and you will continue for the same reasons. Your videos generate monthly advertising revenue. You have a disability. You only create the videos when you are feeling well and in the mood. You receive a disability pension and you live with a relative. You normally spend at most XX hours per week on the activity, but sometimes you go several weeks without doing anything. Due to your health limitations, you are restricted to low-impact activities, and your participation in the activity is irregular. You do not commit to working a set number of hours per day, or days per week to the activity. You do so as your health allows. You don't have deadlines, set hours or co-workers. You fund expenses from your Centrelink payments and money saved from when you were able to work part-time. You have not sought or paid for any professional or expert advice, or joined any professional associations. You do not keep records or receipts. However you are provided with statements regarding the advertising payments. You don't subscribe to any relevant industry publications. You do not have a business plan. More than half of your income has been from one short video. A new ruling limiting personalised ads on videos aimed at children will reduce your future advertising income. You will retain all of your platform channels, even if they do not earn any income. You will create videos regardless of whether they make money because you enjoy it.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 Section 995-1

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 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 Income tax: am I carrying on a business of primary production? provides the Commissioner's view of the indicators that are taken into account when determining when a taxpayer is carrying on a business of primary production. These indicators are not confined to primary production activities but also are applied to all manner of business activities. The factors considered important 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. No one indicator is decisive. The indicators must be considered in combination and as a whole. Whether a 'business' is carried on depends on the large or general impression. Application to your situation In your case, you are an enthusiast who has created three video channels mainly focusing on children's education and entertainment. You began this activity for fun and to educate and entertain others. You receive a disability pension and you live with a relative. You are self-taught and you have not sought or paid for any professional or expert advice, or joined any professional associations. You show a low level of regularity and repetition as you do not post regularly. Your activity on your platform channels are not planned or organised and not carried on in a businesslike manner. Due to your disability, you cannot undertake formal employment and you only create the videos when you are feeling well and in the mood. You are restricted to low-impact activities, and your participation in the activity is irregular. You do not commit to working a set number of hours per day, or days per week to the activity. You do so as your health allows. The size and scale of your video activity is small. You will continue to make videos regardless of whether they make money because you enjoy it. Upon consideration of the relevant factors, your video activity does not amount to carrying on a business for income tax purposes. As your activities do not amount to that of carrying on a business, the income received will not be assessable income under section 6-5 of the ITAA 1997.