Hobby or business

Warning:

This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

End of attention

It is important to determine whether the partnership is carrying on a business, as distinct from pursuing a hobby, sport or recreational activity that does not produce assessable income.

The factors or ‘business indicators’ that various courts and tribunals have taken into account in determining if a business exists for tax purposes include whether the activity:

• has actually started
• has a significant commercial purpose or character
• is undertaken with a purpose of profit, as well as a prospect of profit
• is carried out in a manner that is characteristic of the industry
• has repetition, regularity or continuity
• is planned, organised and carried on in a business-like manner
• is of a sufficient size, scale and permanency to generate a profit
• is not more properly described as a hobby, recreation or sporting activity.

 For more information, see 'Are you carrying on a business?' in:

• Tax basics for small business (NAT 1908)
• If you are a primary producer, see TR 97/11 Income tax: am I carrying on a business of primary production?