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Edited version of private advice
Authorisation Number: 1012685514867
Ruling
Subject: Business v hobby
Question
Am I in business?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
You have earned a few hundred dollars per year for the last 4 to 5 years from the activity.
Your expenses for the same period you have spent well over $5,000.
Expense has also been incurred in activity trips and computer hardware, software and associated items.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 6-5(1)
Income Tax Assessment Act 1997 section 8-1
Income Tax Assessment Act 1997 section 995-1
Reasons for decision
Detailed reasoning
Taxation Ruling TR 97/11 sets out the following factors or indicators that the courts and tribunals have taken into account in determining if a business exists for tax purposes:
• Whether your activity has a significant commercial character, that is, whether your activity is carried on for commercial reasons and in a commercially viable manner.
• Whether you have more than just an intention to engage in business. You need to have made a decision to commence business and have done something about it. If you are still setting up or preparing to go into business, you might not yet have commenced business.
• Whether you have a purpose of profit as well as a prospect of profit. You need to be able to demonstrate a genuine belief that you will make a profit, even if you are unlikely to do so in the short term.
• Whether there is repetition and regularity to your activity, as businesses usually repeat similar types of activities, although one-off transactions can constitute a business in some cases.
• Whether your business is operated in a way that is similar to other businesses in your industry.
• Whether the size or scale of your activity is consistent with other businesses in your industry or is sufficient to allow you to make a sustainable profit.
• Whether your activity is planned, organised and carried on in a business-like manner. This may be indicated by business records and books of accounts, a separate business bank account, business premises, licences or qualifications and a registered business name.
While no one factor can be used to determine whether you are carrying on a business, taken together they should indicate whether your activity is a business.
Application to your circumstances
You do not consider that you are in business and we also consider that, by applying the facts you have provided to the indicators above, your activities do not constitute the carrying on of a business for tax purposes.
Therefore, any money earned from the activity is not assessable income and you are not entitled to deduct expenses incurred in earning this income.