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Edited version of your written advice
Authorisation Number: 1051420673753
Date of advice: 24 August 2018
Ruling
Subject: Hobby vs business.
Question
Am I in the business of tutoring?
Answer
No. Section 995-1 of the Income Tax Assessment Act (ITAA 1997) defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'.
The question of whether a business is being carried on is a question of fact and degree and is a question that has been tested in many court cases. These cases have resulted in the development of a series of indicators that are now applied to determine the matter on the particular facts.
The Commissioner’s view is contained in Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? which lists the factors that are considered important in determining the question of business activity:
● 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.
Having regards to your full circumstances and the above principles, we do not consider the activities you are undertaking to represent that of a business.
This ruling applies for the following period:
Year ending 30 June 2019
Year ending 30 June 2020
Year ending 30 June 2021
The scheme commences on:
1 July 2018
Relevant facts and circumstances
● You tutor School students
● You charge $XX per hour
● You do not charge GST
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(1).
Income Tax Assessment Act 1997 Section 995-1.