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Video transcript - Starting your business - Are you in business?
You’ll often see the term 'enterprise', especially in relation to the ABN (Australian business number) and GST (goods and service tax). Basically, this term covers commercial activities but does not include hobbies or employment.
Businesses are referred to as enterprises for GST and ABN purposes, and so are the activities of charities and religious institutions.
Carrying on a business includes anything you do in the course of starting, operating or ending a business.
Often, the date you start the business is before the business starts to trade. If you are in business, the money you earn from your business activity is generally assessable income, however, you can claim a deduction for expenses you incur in earning that income.
How will I know if I am in business?
It’s important to consider if you carry on your activity for commercial reasons and in a commercially viable way.
For example, you must have made a decision to start your business and have done something about it. If you’re still setting up or preparing to go into business, you might not yet have started the business.
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You have to intend to make a profit or genuinely believe you will make a profit, even if you are unlikely to do so in the short term. There’s usually repetition and regularity to your business activities, although one-off transactions can amount to a business in some cases.
The way you operate your business is consistent with industry norms or other businesses in your industry. The larger the scale of your activity the more likely it will be that a business is being conducted, however, this is not always the case, and a business may still be carried on in a small way. And, it’s enough to allow you to make a sustainable profit.
Finally, you’re using business records and account books, hold a separate business bank account, operate from business premises, have licenses or qualifications and have a registered business name.
While no one factor can be used to work out if you are carrying on a business, taken together they can show if your activity exists as a business for tax purposes.
I was always interested in graphic design, at first I started designing websites at home for family and friends. I worked for about one hour a day, and I only charged to recover my costs.
Fiona’s website designing activity would be considered a hobby. This means Fiona would not include any amounts she received from selling her websites in her tax return and she couldn’t claim any expenses related to her hobby.
We always wanted to work together. Fiona was great at designing websites and I am a computer programmer so we decided to turn Fiona’s hobby into a business and formed a partnership. We registered a business name, turned our spare bedroom into a home office, we work regular business hours and we advertise in trade magazines and online.
We’re now charging for designing and building websites and making a nice profit. We do what we love and get paid for it!
Fiona and Greg are carrying on a business.
It’s also a good idea to research what other rules and regulations will apply to your business. The internet is a great source of information if you’re looking to start a business. Check out your local, state or federal government websites.
This video explores the differences between a hobby and a business, indicates how to determine whether you are in business and outlines what it means to be in business.