Edited version of your written advice

Authorisation Number: 1051265336906

Date of advice: 9 August 2017

Ruling

Subject: Am I in business?

Question 1

Are you carrying on a business as a musician?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 2017.

The scheme commences on:

1 July 2016.

Relevant facts and circumstances

You practice and undertake gigs for the enjoyment of music.

You perform at gigs as a solo musician.

You recently commenced this activity.

You have provided invoices to all venues and events with a statement of supplier, indicating that you conduct your activity as a hobby or recreational pursuit.

You do not hold any specific expertise or relevant qualifications to your activities as a musician.

You have not sought any professional or expert advice in relation to your activities as a musician.

You are not a member of any relevant organisations.

You do not have a specific audience other that the general public.

You advertise your services through social media and artist cards that are given to venues when performing.

You spend approximately a very limited hours performing each week, generally performing at two gigs per month.

You receive a payment in relation to each gig.

In the last income year, you incurred expenses such as:

● Accommodation and meals

● Music equipment

● Travel to and from gigs

● Apportionment of relevant bills including your mobile phone

In the last income year, you received an amount of income and project that income for future years will be similar.

You expect to incur similar expenses in the future, however your music expenses may increase with the need to upgrade equipment or cover maintenance costs of equipment.

You own a number of pieces of equipment that you use for your activity including audio equipment (microphone and speaker), and instruments.

You have recently applied for and obtained an ABN.

You currently employed in an unrelated fulltime role.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Summary

You are not in business as a musician.

Detailed reasoning

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'.

The question of whether a business is being carried on is a question of fact and degree. The courts have developed a series of indicators that are applied to determine the matter on the facts.

Taxation Ruling TR 2005/1 Income tax: carrying on business as a professional artist provides guidance on the principles to be applied in determining whether an artist is carrying on business as a professional artist. The following indicators have been considered relevant by the courts:

● 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.

The above indicators are considered in combination and as a whole. Whether a business is being carried on depends on the general impression gained from looking at all of the indicators, and whether the indicators provide the activity with a 'commercial flavour'.

The pursuit of a hobby is not the carrying on of a business for taxation purposes. Money derived from the pursuit of a hobby is not regarded as income and is therefore not assessable. Expenses incurred in relation to a hobby are also not allowable deductions.

Application to your situation

In your circumstances, your activity does not appear to have a significant commercial purpose. You not are engaged in the activity with an intention to make a profit but primarily for your own enjoyment, highlighted further by your net profit. While you have maintained some records, overall, your activity does not appear to be organised or carried on in the same manner as a normal business activity. The small size and scale of the activity, and limited time invested further indicates that you are not carrying on a business.

Overall, in light of your circumstances, the Commissioner’s view is that your activities as a musician are a recreational pursuit or a hobby. Any amounts you received from this activity is not regarded as income and is therefore not assessable. Expenses incurred in relation to this activity are not considered allowable deductions.

Future years

You should note that conducting an activity that has been described as a hobby is a 'status'. You can change from conducting an activity as a hobby to that of being in business and vice-versa over time as your level of activity changes. Therefore you should evaluate your level of activity on a regular basis to see whether you are conducting a hobby or carrying on a business.

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).