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Edited version of your written advice
Authorisation Number: 1012716449964
Ruling
Subject: Business
Question
Am I in business?
Answer
No.
This ruling applies for the following period:
Year ended 30 June 2014
The scheme commenced on
1 July 2013
Relevant facts and circumstances
Your activity costs were approximately $20,000 however sales will not cover these costs.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 995-1
Reasons for decision
The question of whether a business is being carried on is a question of fact and degree to be determined on a case by case basis. The courts have developed a series of indicators to determine the matter, which are summarised in Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? (TR 97/11). Although this ruling specifically refers to primary production, the same principles apply to all businesses. Some indicators of carrying on a business which the courts have considered to be relevant include:
• whether the activity has a significant commercial purposes or character
• whether the taxpayer has more than just an intention to engage in business
• 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.
In your case you have calculated that you will lose money for each sale.
In applying the facts of your case to the indicators outlined above, the general impression gained is that you are not currently carrying on a business. As your sale activity is not a business, the income from that activity is not assessable under section 6-5 of the Income Tax Assessment Act 1997 and any loss or outgoing is not deductible under section 8-1.
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