| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private advice
Authorisation Number: 1012668746358
Ruling
Subject: Business
Question
Are you carrying on a business in the 2013-14 financial year?
Answer
No.
This ruling applies for the following period:
Year ended 30 June 2014
The scheme commenced on
1 July 2013
Relevant facts and circumstances
You have worked in this activity for about 10 years as you enjoy the work. You have a full time job outside this activity.
You are engaged in this activity for approximately 18 hours per week and you keep minimal records except where required by state authorities.
Two of the last three years produced losses.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 995-1
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 8-1
Reasons for decision
Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? lists the relevant indicators to consider in determining whether a taxpayer's activities amount to the carrying on of a primary production business. These indicators are equally relevant when determining whether a taxpayer is carrying on a business in general.
The relevant indicators compiled from various case authorities are as follows:
• 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 profitability of the activity,
• the repetition and regularity of the activity,
• whether the activity is 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 business-like manner such that it is directed at making a profit,
• the size, scale and permanence of the activity.
From the many court and tribunal decisions in regard to the 'carrying on of a business' it is gathered that a determination as to whether particular activities constitute a business in general is a question of fact, degree and impression in each case. The various factors are only matters to be taken into account and weighed up in a given situation and the weight will vary with the situation.
After applying the indicators and the other observations from court cases to your set of facts, it is considered that your activity for the 2013-14 financial year is a mere pursuit of a hobby and not a business activity or a profit making activity
Paragraphs 45 of Taxation Ruling TR 2008/2 Income tax: various income tax issues relating to the horse industry; including whether racing, training and breeding activities (carried out as stand-alone activities or in combination) amount to the carrying on of a business states:
If the training amounts only to a hobby or recreational pastime, the gross proceeds will not be assessable under section 6-5 and the non-capital outlays and other expenses will not be deductible under section 8-1.