Private ruling: Am I in business
Published: June 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you carrying on business for tax purposes? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 8-1. | Income Tax Assessment Act 1997 Section 995-1.

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are an Australian resident, your assessable income includes all income derived directly or indirectly from all sources whether in or out of Australia during the income year. 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, or are necessarily incurred in carrying on a business for the purpose of 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. For an author to be able to claim on-going deductions under section 8-1 of the ITAA 1997 during the income years they are incurred, an author must be carrying on a business of book writing. Section 995-1 of the 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 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 repetition and regularity of the activity · whether the activity is of the same kind and carried on 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 businesslike manner such that it is direct 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. 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. We have determined that your activity is not carried on as a business for taxation purposes. The payments you receive in relation to this activity are not assessable as ordinary or statutory income under the ITAA 1997. The expenses related to the activity are not deductible under section 8-1 of the ITAA 1997.

Relevant facts: You currently have an ABN which you use to declare income. | GST has not been claimed on income or expenses. | You keep records of sales. | You have declared the net income in your income tax returns. | You were employed full-time. | There was no profit-making intention. | There is no prospect of making a sustainable profit. | There is no repetition or regularity to the enterprise. | You do not have a business plan.