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Edited version of private advice
Authorisation Number: 1051814220357
Date of advice: 9 March 2021
Ruling
Subject: Am I in Business?
Question
Does the activity of selling clothing online constitute carrying on a business for the purposes of the income tax legislation?
Answer
No.
After considering the factors in Taxation Ruling Income tax: am I carrying on a business of primary production? (TR 97/11), your activity does not amount to a business, since you do not have an intention to engage in business or to derive profit, you do not pay for your online presence and you do not manage your online-selling activity as if it was a business. Therefore, any money earned from the activity is not assessable income and you are not entitled to deduct expenses incurred in earning these amounts. Further information on whether an activity is a hobby, or a business can be found on our website: ato.gov.au by searching quick code QC 31733 and QC 28130.
This ruling applies for the following periods:
30 June 20XX
30 June 20XX
30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
Your primary source of income comes from your sole trader activities, which do not involve selling clothes.
You have paid retail price in purchasing thousands of items of clothing over your adult life. Most of the clothing are now considered vintage, which you wear at various times.
Some of the clothes purchased have appreciated in value considerably over the time you have sold them. However, many were sold for less than the original purchase price.
Due to Covid-19 pandemic, contract work in your industry has dried up resulting in a significant decrease in your income. You continued to sell your entire wardrobe online although overall you are making a significant loss of money compared to the retail price you paid. Your motive is not to make a profit but to use funds to live off.
You sold the clothing from your home. You advertised your clothes on your personal Facebook account, personal Instagram account and a commercial preloved clothes website.
You have not kept general accounting records in relation to the selling of your clothing on the various online sites.
You have done nothing to improve the value of the items.
You have not sold clothing on a consistent and repetitive basis.
You did not pay for your online auctions or a 'shop' space.
Generally, you received less than the original purchase price of the clothes.
You have no intention to sell clothes online as a business.
You do not have a business plan or a business name, nor do you employ staff, you have no website, you operate out of business premises and do not advertise items for sale outside this site.
You made a loss from this activity in each year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5(1)
Income Tax Assessment Act 1997 section 995-1.
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