| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012729576352
Ruling
Subject: Business
Question 1
Is the administration of your website considered to be a business?
Answer
No.
Question 2
Is your website considered to be a non-profit organisation?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2009
Relevant facts and circumstances
You have a website that you created as a hobby that is used for discussion and distribution of computer programming.
You incorporated a Google Adsense based banner as advertising on your website. You also incorporated a provision for donations to be made where users can donate in appreciation of your website.
You added the advertising banner and the donation button to help you cover site hosting costs with the intention that 100% will be used towards maintaining and building the site.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 995-1
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 8-1
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 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.
In your case, although some of the indicators above are affirmative the overall impression gained is that you created a website as a hobby. You incorporated a Google Adsense advertising banner and a donation button in order to cover your costs. You have no intention of making a profit or conducting a business.
Consequently it is considered that your activities amount to that of a hobby and 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.
Non-profit organisation
The following is an extract from our website - Non-profit requirement
A non-profit organisation is an organisation that is not operating for the profit or gain of its individual members, whether these gains would have been direct or indirect. This applies both while the organisation is operating and when it winds up.
Any profit made by the organisation goes back into the operation of the organisation to carry out its purposes and is not distributed to any of its members.
We accept an organisation as non-profit where its constituent or governing documents prevent it from distributing profits or assets for the benefit of particular people - both while it is operating and when it winds up. These documents should contain acceptable clauses showing the organisation's non-profit character. The income tax law does not prescribe the words that a non-profit organisation must have in its constituent documents. The following example clauses would be acceptable, if other clauses do not contradict them. The organisation's actions must be consistent with this requirement.
From the information you have provided your website is not a non-profit organisation.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
