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Edited version of your private ruling
Authorisation Number: 1012003061207
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Ruling
Subject: Am I in business
Question
Are the payments you receive for minding your grandchild assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
This ruling applies for the following periods
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commenced on
1 July 2011
Relevant facts
You are unemployed and in receipt of Newstart allowance.
You look after your infant grandchiild for three to four days per week depending on your child's work commitments.
Your child insists that they pay you to thank you for the care you are providing. They either pay you a weekly amount or pay for your bills or groceries for the week. These amounts vary depending on your bills/groceries amount.
Mostly you refuse to take the money so your child pays for your bills or groceries.
You do not consider that you are running a business. You do not have a business plan, or employees and you have not set up business premises.
You state that there is nothing commercial about your activities. You look after your grandchild at your home. The child gets dropped of in the mornings and picked up in the afternoons.
You are of the opinion that it is a private and domestic arrangement you have with your child.
You insist that no money should be given to you but your child says that you must accept it or they will send your grandchild to a childcare centre. You do not want this to happen as you want to look after your grandchild until commencement of school.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Reasons for decision
Taxation Ruling TR 97/11 sets out the following factors or indicators that the courts and tribunals have taken into account in determining if a business exists for tax purposes:
· Whether your activity has a significant commercial character, that is, whether your activity is carried on for commercial reasons and in a commercially viable manner.
· Whether you have more than just an intention to engage in business. You need to have made a decision to commence business and have done something about it. If you are still setting up or preparing to go into business, you might not yet have commenced business.
· Whether you have a purpose of profit as well as a prospect of profit. You need to be able to demonstrate a genuine belief that you will make a profit, even if you are unlikely to do so in the short term.
· Whether there is repetition and regularity to your activity, as businesses usually repeat similar types of activities, although one-off transactions can constitute a business in some cases.
· Whether your business is operated in a way that is similar to other businesses in your industry.
· Whether the size or scale of your activity is consistent with other businesses in your industry or is sufficient to allow you to make a sustainable profit.
· Whether your activity is planned, organised and carried on in a business-like manner. This may be indicated by business records and books of accounts, a separate business bank account, business premises, licences or qualifications and a registered business name.
· whether the activity is better described as a hobby or recreational activity.
While no one factor can be used to determine whether you are carrying on a business, taken together they should indicate whether your activity is a business.
Application to your circumstances
We consider that, by applying the facts you have provided to the indicators above, your activities do not constitute the carrying on of a business for tax purposes.
While your activities have repetition and regularity, this alone does not lend itself to the existence of a business. There is a high element of your activities that is consistent with being a private and domestic arrangement. You do not expect any money for your services and your activities do not have any commercial characteristics.
As you are not carrying on a business of childminding, any monetary amounts you receive in relation to this activity are not assessable under section 6-5 of the ITAA 1997 and the expenses related to the activity are not deductible under section 8-1 of the ITAA 1997.
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