Edited version of private ruling

Authorisation Number: 1011604102093

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Coin trading on EBAY

Are you carrying on a business of trading coins on EBAY?

No.

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commences on:

1 July 2008

Relevant facts and circumstances

Since childhood you have had an interest in collecting old coins. You began collecting coins through EBAY.

You have an interest in all types of coins including coins from foreign countries. You found that EBAY was the easiest and best way to collect these coins.

You are very particular with the coins you collect. After receiving a coin purchased on EBAY, you may see that it has a small fault or blemish and the value to you is not as great as you thought before buying it. Therefore, you will resell the coin on EBAY.

You are not selling the coins with a view of making a profit.

You only buy coins for your collection. You have not intentionally purchased a coin to sell at a later date for a profit.

During the 2010-11 financial year, your EBAY coin trading increased to its current levels. You were trading in the 2010-11 financial year however you have put a hold on your collecting until you receive this private ruling.

The only capital outlay has been the purchase of coin collection books, some of which are old and second hand as you could not afford new books. These books are necessary as they contain information such as the number of coins made (of a particular type) and the weight. This is important as China make fake coins and try to sell them internationally as genuine coins.

You do not have a business plan and consider coin collection as a hobby, not a business. You do not have a view to make a profit. In fact, you calculated that you made a loss from buying and selling coins in a recent financial year.

You have not kept records or receipts from the purchase and sale of coins. However, Paypal keep records of sales and purchases, which is where you got the above figures.

You only buy and sell on EBAY.

You operate out of your home.

You do not have other employment and you are on a government pension.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 6-5(1)

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 995-1.

Summary

We do not consider that your EBAY coin trading activity has the necessary characteristics of a business for taxation purposes. Therefore, income derived from this activity will not be assessable.

Detailed reasoning

Assessable income

A taxpayer is liable to pay tax on their taxable income derived during the income year. Taxable income is calculated by subtracting allowable deductions from the taxpayer's assessable income.

Ordinary income

Income is generally assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). Under subsection 6-5(1) of the ITAA 1997, ordinary income means income 'according to ordinary concepts'. This phrase is not defined under the legislation, but a large body of case law has developed to identify the factors that indicate if an amount is income according to ordinary concepts.

Statutory income

Under section 6-10 of the ITAA 1997 assessable income also includes statutory income. Statutory income is income that is not ordinary income but is included as assessable income by specific provisions of the tax law.

Carrying on a business

Section 995-1 of the ITAA 1997 defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'.

The case of Evans v. FC of T 89 ATC 4540; (1989) 20 ATR 922 stated that whether or not an activity amounts to carrying on business for taxation purposes is a question of fact. There is no exhaustive or determinative definition which can be applied to determine this matter. Martin v. Federal Commissioner of Taxation (1953) 90 CLR 470; (1953) 10 ATD 226; (1953) 5 AITR 548, however, provides that the test for determining whether or not a business is being carried on is both subjective, which considers the individuals purpose at the relevant time, and objective, which considers the nature and extent of the activities undertaken.

Taxation Ruling TR 97/11 provides the Commissioner's view of the factors used to determine if you are in business for tax purposes.

In the Commissioner's view, the factors that are considered important in determining the question of business activity 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.

Application to your circumstances

In your case you have had an interest in coin collecting since childhood, and began collecting on EBAY. Your EBAY coin collecting is a personal interest to you and you consider it a hobby. You only sell unwanted coins from your collection.

Your intention to sell your coins is not to make a profit, and you have not intentionally purchased a coin to sell at a later date for a profit.

You have no intention to engage in business.

The selling of your coins has limited commercial character or purpose. You do not have a business plan, nor do you operate out of business premises. You do not keep records of your transactions.

Based on the information you have provided we do not consider that the activity has the necessary characteristics of a business for taxation purposes. Therefore, any income you received 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 incurred in relation to this activity will not be deductible under section 8-1 of the ITAA 1997.