Edited version of private ruling

Authorisation Number: 1011618258080

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Ruling

Subject: Am I in business of selling personal items

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

No.

This ruling applies for the following periods:

Year ended 30 June 2003

Year ended 30 June 2004

Year ended 30 June 2005

Year ended 30 June 2006

Year ended 30 June 2007

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commences on:

1 July 2002

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You and your spouse are employed full time. Your main source of income is derived through our respective professions.

You recently had children, and to save money you started buying second hand children's clothes and toys from various outlets.

As the children grew, you would often sell the old items as they were no longer required.

Your spouse collected items for personal use.

You do not consider that you are operating a business. The selling of private items on EBAY is a hobby and as a means of disposing of items that you no longer require. It has never been your intention to buy any item for the sole purpose of re-selling it.

You have an EBAY store which makes it easier and cheaper to sell but you don't have to use it like a business to have one.

You have no business plan and do not keep records of sales.

You sell your items on EBAY from your home.

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 995-1.

Summary

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

Detailed reasoning

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.

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 that are considered important in determining if you are in business for tax purposes. The factors 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 have acquired a large number of personal items which you no longer needed.

The selling of your personal items has limited commercial character or purpose. You do not have a business plan, nor did 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. Your EBAY sales activities are a hobby or pastime undertaken to sell your personal items.

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.

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