Private ruling: Deductibility of car and travel expenses relating to tutoring activities
Published: August 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Questions and answers: | Is the income you receive from your tutoring activities assessable income? | No. | Are you entitled to a deduction for car and travel expenses relating to your tutoring activities? | No.

Relevant facts and circumstances: You currently tutor several school-aged students. You have not advertised your services. You spend up to 3 hours a week tutoring. You charge approximately $50 an hour. You travel to the students' homes to conduct the tutoring. You have incurred expenses in relation to this travel. You have kept odometer records in relation to this travel. You have spent time at home finding resources for your tutoring. You do not have a current ABN.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2). Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: Assessability of income from tutoring activities Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Where a person is carrying on an activity that constitutes a business, any money they earn is assessable, however, where a person carries on an activity that constitutes a hobby or recreation, any money they earn is not assessable. The Commissioner's view in regards to determining whether an activity constitutes a business is set out in Taxation Ruling TR 97/11, which outlines the following indicators that the courts and tribunals have identified as relevant in determining whether a business exists for tax purposes: · 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 repetition and regularity of the activity, · whether the activity is of the same kind and carried out 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 business like 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, a form of recreation or a sporting activity. While no one factor can be used to determine whether you are carrying on a business, taken together they should indicate whether or not your activity is a business. In your case, you tutor a small number of students for up to a maximum of three hours a week. You do not advertise your services. There is nothing to indicate that you began tutoring for the purpose of making a profit, or, that there is a prospect of making a profit. Your tutoring activities therefore do not have a significant commercial purpose or character, are not carried out in a business-like manner and do not have characters of size, scale and permanency. For these reasons, your tutoring activities do not constitute the carrying on of a business. Therefore, the income you receive from your tutoring activities is not assessable income. | Detailed Reasoning - Deductibility of car and travel expenses: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Your car and travel expenses relate to your tutoring activities. As explained above, these activities do not constitute a business and therefore the income is not assessable. As the car and travel expenses relate to income that is not assessable income, the conditions of section 8-1 of the ITAA 1997 have not been met, and you are not entitled to a deduction for these expenses.

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.