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Ruling

Subject: EBay am I in business

Question 1

Are you carrying on a business of selling your personal art collection and other personal items on EBAY?

Answer

No.

Question 2

Are you carrying on a business of buying and selling art on EBAY?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commences on:

1 July 2009

Relevant facts and circumstances

For more than 10 years you worked in remote communities.

As thanks for the work that you performed for the communities, you were given approximately 50 paintings from friends and acquaintances. You displayed your favourite pieces of work on walls of your home and put the remainder into storage.

Paintings were neither a passion nor a real interest to you. Initially you did not buy paintings for your personal collection with the intention of selling them in the future. You did not collect the paintings to sell.

You sold one of the paintings on eBay, and due to the large sale amount you decided to sell the remainder of your collection on eBay for some extra disposable cash. However you did keep several paintings that had a personal meaning to you, and ones that you particularly liked.

In the 2009-10 financial year you sold approximately 45 paintings.

Due to your success with selling your personal art collection, you began purchasing and reselling paintings on eBay. You sold approximately 50 paintings.

You didn't have a selling strategy when selling art on eBay, you mainly started eBay auctions at a $0.99 starting price with no reserve. That way the items sold at the market value, being the final sale price. You did not use the 'Buy it Now' auction strategy.

When purchasing art on eBay to resell, you bid on artists you knew about from the art you had in your collection and had sold previously on eBay. You also bid lower than what you thought you could sell the items for.

You intended to make a profit from the resale of paintings which you purchased on eBay. However you lost money on some auctions and made small profits on others, usually between $10 and $60.

You estimate that you only made a profit of approximately $1,500 for the year due to losses, the high cost of eBay and PayPal fees, internet, postage, travel and packing materials.

You do not have a business plan, nor did you keep records of sales and expenses.

You were employed full time while selling items on eBay, and only spent approximately four hours per week on your eBay sales activities.

You do not have specialist knowledge in art, nor did you receive any specialist advice or become a member of any professional body in relation to dealing art.

You have not registered a business name.

You did not advertise nor sell any paintings outside of eBay.

You also used your eBay account to sell private items such as clothes, furniture, video games and DVD's.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 104-10,

Income Tax Assessment Act 1997 Subsection 118-10(2)

Reasons for decision

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

You received a number of paintings from friends and acquaintances, and collected them as a hobby.

You decided to sell your art collection on eBay.

You also purchased and sold art on eBay with the intention of making a profit.

Both the selling of your personal painting collection and the buying and selling of art had limited commercial character or purpose.

Although you had an intention to make a profit from your eBay selling activities, you do not have plan in place (business plan) that shows how a profit can be made.

Although you have an element of regularity or repetition with your Bay sales activity, the activity is carried out on a small scale.

Your eBay sales activity is not carried on in the same manner as an ordinary business activity.

You do not have a system to allow a profit to be made.

You do not 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 and no deductions are allowed for the associated expenses.