Question:
Badges of business
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
A Tribunal ruling (previously reported in September 2011 taxInsight) found that the CEO of a services company was indeed conducting a business of share trading on a part-time basis. This decision allowed for claiming deductions because of the drop in value of shares during the global financial crisis and further clarified the factors to consider when assessing whether an activity is a business or mere academic pursuit or hobby.
Modern technologies such as laptops, internet connections, apps on mobile phones and electronic share trading platforms, mean that the concept of operating in a business-like manner is becoming increasingly fluid. In this case the Tribunal indicated that the taxpayer met the test of operating in a businesslike manner with… a degree of sophistication and business purpose.
The usual factors to be considered when determining if an activity is a business have been taken to be:
+ Existence of repetition;
+ Profit-making objective;
+ Complexity and magnitude of the undertaking;
+ Intention to engage in trade regularly, routinely or
systematically;
+ Sophistication involved;
+ Business-like manner;
+ Whether any profit/loss is regarded as arising from a discernible pattern of trading;
+ Volume of operating;
+ Capital employed; and
+ When considering a potential share trading business:
– Turnover;
– Operating to a plan, setting budgets and targets, keeping records;
– Maintaining an office;
– Accounting for share transactions on a gross receipts basis; and whether
– You are engaged in another full-time profession.
In this case the engaging in another fulltime profession and the absence of maintaining an office did not overwhelm the other factors in the Tribunal’s considerations.
Given the decision that the activity was a business, the shares held during the global financial crisis downturn were considered trading stock. Consequently, under the valuation rules for trading stock, the taxpayer could elect to value closing stock using market value and consequently for tax purposes realise the loss during those years. Had it not been a business and the shares not been trading stock the loss could not be realised for tax purposes until the shares were sold.
AAT Case [2011] AATA 545, WTB 1474
