Edited version of your written advice

Authorisation Number: 1012912371221

Date of advice: 18 November 2015

Ruling

Subject: Am I in business - band member

Issue 1 - Income Tax

Question 1

Is the money that you receive from playing in a band assessable income?

Answer

No.

Issue 2 - GST

Question 1

Are you entitled to an Australian Business Number (ABN)?

Answer

No, not currently.

Question 2

Is GST payable on the performance fees?

Answer

No, not currently.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20YY

Year ended 30 June 20ZZ

The scheme commences on:

1 July 20WW

Relevant facts and circumstances

You are a musician in a band.

The band plays on average between 2 to 5 times a month at various clubs and venues.

The band very rarely rehearses as a group.

The band never hires professional studio rooms.

The band never receives official coaching.

You receive a small amount of money per performance.

For the 20ZZ financial year, you received $ after deducting costs for equipment depreciation, travel and maintenance a small profit for the year.

You are employed full time in a profession not related to music.

The reason you play in the band is because of your love and passion for music.

Relevant legislative provisions

Income Tax Assessment Act 1997, section 6-5

Income Tax Assessment Act 1997, section 8-1

Income Tax Assessment Act 1997, section 995-1

A New Tax System (Australian Business Number) Act 1999 section 8

A New Tax System (Australian Business Number) Act 1999 section 41

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

Reasons for decision

Issue 1 - Income Tax

Question 1

Summary

The money that you receive from playing in a band is not considered assessable income; your band playing is considered a hobby.

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. Federal Commissioner of Taxation 89 ACT 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 tests 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 the reason you play in the band is because of your love and passion for music.

You have no intention to engage in business. You do not have a business plan or hire professional studio rooms. The size and scale of the activity is considered small compared to bands that are considered to be in business.

Your main source of income is your full time employment in another profession.

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 for the years ended 30 June 20XX, 30 June 20YY and 30 June 20ZZ 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.

Future years

Although your activity has been described as a hobby, you can change from conducting an activity as a hobby to that of being in business and vice-versa over time, as your level of activity changes. Therefore you should evaluate your level of activity on a regular basis to see whether you are conducting a hobby or carrying on a business.

Issue 2 - GST

Question 1

Section 8 of the A New Tax System (Australian Business Number) Act 1999 (ABN Act) states:

(1) *You are entitled to have an Australian Business Number (*ABN) if:

(a)  you are * carrying on an * enterprise in * Australia; or

(b)  in the course or furtherance of carrying on an enterprise, you make * supplies that

are * connected with the indirect tax zone.

(2) A *Corporations Act company is entitled to have an Australian Business Number (*ABN).

(*Denotes a term defined in section 41 of the ABN Act)

Section 41 of the ABN Act provides that 'enterprise' for the purposes of the ABN Act has the meaning given by section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

Paragraph 9-20(1)(a) of the GST Act provides that 'enterprise' includes an activity or series of activities done in the form of a business. This includes a business.

However, paragraph 9-20(2)(b) of the GST Act excludes private recreational pursuits and hobbies from the definition of enterprise.

Your activity of performing in the band is a hobby. Therefore, it is excluded from the definition of enterprise in the GST Act and ABN Act.

As you are not carrying on an enterprise and you are not a company, you are not entitled to an ABN.

(It is assumed that you are not leasing out property. Leasing out property on a regular or continuous basis is an enterprise).

Additional information

The band is not currently entitled to an ABN because the activities of the band are hobby activities under the current circumstances.

Where a payer requests the band to quote an ABN, the band should complete a Statement by a supplier form and place an X in the box next to the words 'The supplier is not entitled to an ABN as they are not carrying on an enterprise in Australia' and give the completed form to the payer.

If the scale of the band's activities increased, or the band activities became commercial (for example, it got a recording contract), at some point in the future, the band activities could become a business or enterprise.

Question 2

GST is payable on taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the

(GST Act, which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that

you *carry on; and

(c) the supply is *connected with the indirect tax zone; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free

or *input taxed.

(*Denotes a term defined in section 195-1 of the GST Act)

Based on the current circumstances, the activity of providing performances is not an enterprise. Therefore, the supply of a performance is not made in the course of furtherance of an enterprise that the supplier carries on. Hence, GST is not payable on the performance fees under the current circumstances.