Private ruling: Business vs. hobby
Published: June 2012
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Q1: Are your activities as a conductor of a community choir considered to be business activities? | A1: No.


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 provided. 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 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 out 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 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. In your case, you accepted the position with no expectation of payment, and you perform the activity purely for enjoyment. The amounts you receive from your members are out of gratitude for your services, they do not give this activity a significant commercial purpose or character. They are at a level which may effectively cover expenses incurred in performing your role, but not reasonably provide a profit which can be relied upon under ordinary concepts. Further to this, you do not have a business plan, have not invested capital in the operation, performed market research or advertised, and you spend on average a few hours per week on the activity. It is considered that your activities for the activity are in the nature of a hobby and that they do not constitute the carrying on a business for taxation

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. | Relevant facts: You conduct for a local community activity. | You volunteered for this unpaid position as the activity would have disbanded otherwise. | You have an unrelated full-time occupation. | You receive a weekly amount from your members to cover expenses. | You have recently moved home and now live a greater distance away from where the activity practices. | The members have offered to increase the weekly amounts to assist you with your expenses. | Your intention is for this activity to provide enjoyment rather than profit. | You do not have a business plan or an Australian Business Number (ABN). | You have not invested capital in the activity, performed market research, or advertised. | You spend on average a few hours a week on the activity.