You will often see the term 'enterprise', especially in relation to the ABN and GST. Basically, this term covers commercial activities but does not include hobbies or employment. Businesses are referred to as enterprises for GST and ABN purposes, and so are the activities of charities and religious institutions. Carrying on a business includes anything you do in the course of starting or ending a business. Often, the date you start the business is before the business starts to trade.
The following are some factors that courts and tribunals take into account in working out if a business exists for tax purposes.
While no one factor can be used to work out whether you are carrying on a business, taken together they can show whether your activity is a business:
- Does your activity have a significant commercial character? It is important to consider whether you carry on your activity for commercial reasons and in a commercially viable manner.
- Do you have more than just an intention to engage in business? You must have made a decision to start your business and have done something about it. If you are still setting up or preparing to go into business, you might not yet have started the business.
- Do you have the purpose of profit as well as the prospect of profit? Do you intend to make a profit or genuinely believe you will make a profit, even if you are unlikely to do so in the short term?
- Is there repetition and regularity to your activity? Businesses usually repeat similar types of activities, although one-off transactions can amount to a business in some cases.
- Is your business similar to other businesses in your industry? Is the way you operate consistent with industry norms or other businesses in your industry?
- What is the size, scale or permanency of your activity? Is the size or scale of your activity consistent with other businesses in your industry? Is it enough to allow you to make a sustainable profit?
- Is your activity planned, organised and carried on in a businesslike manner? This can be shown using:
- business records and account books
- a separate business bank account
- business premises
- licenses or qualifications
- a registered business name.