Edited version of private advice

Authorisation Number: 1051986076441

Date of advice: 23 May 2022

Ruling

Subject: Am I in business - Hobby

Question

Did your activities during the 2019-20 and 2020-21 financial years constitute a hobby, as opposed to carrying on a business?

Answer

Yes, your activities during the 2019-20 and 2020-21 financial year are considered to be a hobby.

We have weighed up the indicators of carrying on a business outlined in Taxation Ruling TR 97/11 and have determined that you were not carrying on a business during those years because your activities did not have a significant commercial purpose or profit intention, you did not intend to engage in business, and your activities were not carried on in a businesslike manner.

Therefore, any income received from your activity during the 2019-20 or 2020-21 financial years is not assessable income and you are not entitled to deduct any expenses incurred in earning these amounts.

This ruling applies for the following periods:

Year ended 30 June 2020

Year ended 30 June 2021

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You decided to start collecting plants during the 2019-20 financial year because you had an interest in them, and you wanted to broaden your knowledge of growing and producing these plants.

You decided to sell some plants online. You did not use an online store created specifically for the sale of your plants.

You sold plants to the general public as well as to other collectors.

You stated that your intention when selling the plants was to have a self-sustaining hobby. Selling plants would allow you to afford other plants as well as the materials needed to care for the plants.

Your activities involved tending and caring for the plants and producing saleable plants through various means.

The types of expenses you incurred were fertilisers, pesticides, antifungals, pots, potting mixes, tools, postage fees, and fees to facilitate online transactions.

You did your activities from your home.

You spent a few hours a week on your activities, and your activities were often sporadic depending on various factors.

You sold a relatively small number of plants each month. Some months you did not sell any plants.

You do not have any formal training.

You did not keep any financial records.

You did not have a business plan or a business name.

You did not undertake any advertising.

You have provided some information about your income and expenses by gathering the information retrospectively. The information shows that you generally purchased plants for anywhere between $X and $X, and sold plants for between $X and $X.

You have permanent part time employment.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1