Edited version of private ruling

Authorisation Number: 1011599061510

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Ruling

Subject: Selling items on EBAY

Are you carrying on a business of selling items on EBAY?

No.

This ruling applies for the following periods:

year ended 30 June 2010

year ended 30 June 2009

year ended 30 June 2008

year ended 30 June 2007

year ended 30 June 2006

The scheme commences on:

1 July 2005

Relevant facts and circumstances

You were living overseas for a number of years and were employed as a teacher. In your spare time you purchased goods locally and sold them on EBAY.

You also collected watches.

After returning to Australia year you began selling items accumulated while overseas including your watch collection.

You last sold an item early in the 2009-10 financial year. However, you will be selling some items such as second hand items/clothing in the future.

You operate out of your home.

You have not kept records of sales and purchases.

You do not have an expectation to sell your items at a profit as you are merely selling your watch collection and excess personal items collected while overseas.

You do not have a formal business plan, projection or budget/forecast.

You consider your watch collection a hobby and you are simply selling your collection on EBAY.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 6-5(1)

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Summary

We do not consider that your EBAY selling activity has the necessary characteristics of a business for taxation purposes. Therefore, income derived from this activity will not be assessable.

Detailed reasoning

Assessable income

A taxpayer is liable to pay tax on their taxable income derived during the income year. Taxable income is calculated by subtracting allowable deductions from the taxpayer's assessable income.

Ordinary income

Income is generally assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). Under subsection 6-5(1) of the ITAA 1997, ordinary income means income 'according to ordinary concepts'. This phrase is not defined under the legislation, but a large body of case law has developed to identify the factors that indicate if an amount is income according to ordinary concepts.

Statutory income

Under section 6-10 of the ITAA 1997 assessable income also includes statutory income. Statutory income is income that is not ordinary income but is included as assessable income by specific provisions of the tax law.

Carrying on a business

Section 995-1 of the ITAA 1997 defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'.

The case of Evans v. FC of T 89 ATC 4540; (1989) 20 ATR 922 stated that whether or not an activity amounts to carrying on business for taxation purposes is a question of fact. There is no exhaustive or determinative definition which can be applied to determine this matter. Martin v. Federal Commissioner of Taxation (1953) 90 CLR 470; (1953) 10 ATD 226; (1953) 5 AITR 548, however, provides that the test for determining whether or not a business is being carried on is both subjective, which considers the individuals purpose at the relevant time, and objective, which considers the nature and extent of the activities undertaken.

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 the taxpayer has a purpose of profit as well as a prospect of profit from the activity

· 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 on 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 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 gained.

Application to your circumstances

In your case, you had a collection of watches. Your EBAY sales activities are a hobby or pastime undertaken to sell your watch collection.

Your intention to sell your watch collection was not to make a profit, and there was no intention to engage in business.

The selling of your watch collection has limited commercial character or purpose. You do not have a business plan, nor do you operate out of business premises. You do not keep records of your transactions.

Based on the information you have provided we do not consider that the activity has the necessary characteristics of a business for taxation purposes. Therefore, any income you received in relation to this activity will not be assessable under section 6-5 of the ITAA 1997 as ordinary income. In addition, any expenses that you incurred in relation to this activity will not be deductible under section 8-1 of the ITAA 1997.

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