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Edited version of private advice
Authorisation Number: 1051624796275
Date of advice: 3 February 2020
Ruling
Subject: Am I in business?
Question
Do your horse racing and horse breeding activities constitute the running of a business?
Answer
No. You do not meet the relevant factors contained in Taxation Rulings TR 97/11 and TR 2008/2. Further information about carrying on a business can be found by searching 'QC 31733' on ato.gov.au.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
Month X 20XX
Relevant facts and circumstances
You established a trust in order to buy racehorses as well as shares in syndicates that hold horses.
The horses are trained and bred by a third party who you pay.
You entered into this arrangement with the intention of making a profit from racing and of selling the horses but you are also doing it due to your love of racehorses.
You have purchased a number of horses.
For the financial year ended 30 June 20XX, your expenses were $X while your income was $X.
For the financial year ended 30 June 20XX, your expenses were $X while your income was $X.
For the current financial year so far your expenses were $X while your income was $X.
Since Month X 20XX, you have sold X weanlings, X mares, X ready to run yearlings and X racehorses.
You have no prior experience in the horse breeding industry.
You had part shares in racehorses as a hobby prior to establishment of the trust.
You sell horses by taking them to auction or by selling privately.
You find horses by going to sale yards and getting involved with other businesses to try and partner with them.
You go to the tracks in the early mornings occasionally.
You currently engage a number of horse trainers.
Horse racing comprises about X% of your activities and breeding comprises about X%.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 8-1
Further issues for you to consider
Future years
You should note that conducting an activity that has been described as a hobby is a 'status'. 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.