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.

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It is important to determine whether the trust 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 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.

Find out more

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 97/11Income tax: am I carrying on a business of primary production?

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