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 about:
- Business or hobby?
- TR 97/11 Income tax: am I carrying on a business of primary production?