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Edited version of your written advice
Authorisation Number: 1012737437713
Ruling
Subject: Am I in business?
Question 1
Are you carrying on a business?
Answer
No, we consider the activity to be a hobby
Question 2
Are you required to have an Australian Business Number (ABN)?
Answer
No
Relevant facts and circumstances
You are a full time employee.
You work x hours per work in accordance with return to work maternity agreement.
You perform shift work rotating on a six week roster and as such any work will not be planned or formally organised.
You hold a qualification. You have insurance and are a member of an association. You will be keeping client records, which is in accordance of what is expected in your industry and in compliance with the association's code of conduct.
You are looking at charging well below the industry price $30-$40 per hour for family and friends.
You will not be aiming at making any profits, merely recovering your overheads (laundry, electricity, memberships and insurance.
You are not going to be doing any advertising and referrals will be through word of mouth.
You will be working out of your primary residence.
You do not expect to earn of $75,000 per annum and will not be applying for GST registration.
You will not be employing anyone to assist you.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 995
A New Tax System (Australian Business Number) Act 1999 subsection 8(1)
A New Tax System (Goods and Services Tax) Act 1999 subsection 9-20 (1)
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20 (2)(b)
Reasons for decision
Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'.
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.
Based on the information you have provided we do not consider that the activity has the necessary characteristics of a business for taxation purposes but rather that of a hobby. Therefore, any income you receive 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 incur in relation to this activity will not be deductible.
Entitlement to an ABN
Section 8(1) of the A New Tax System (Australian Business Number) Act 1999 (the ABN Act) provides that you are entitled to an to have an Australian Business Number (ABN) if you are re carrying on an enterprise in Australia or in the course or furtherance of carrying on an enterprise, you make supplies that are connected to Australia. Section 41 of the ABN Act provides that enterprise is to be given the same meaning as in section 9-20 of the A New Tax system (Goods and Services Tax) Act 1999 (the GST Act).
Paragraph 9-20(2)(b) of the GST Act provides that the a private recreation pursuit or hobby are specifically excluded from the definition of an enterprise. Accordingly as we have already determined your activity has the character of a hobby you will not be carrying on an enterprise and therefore not entitled to an ABN.
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