The major issues:
1) Is this a hobby or a business?
2) If it’s a business, is it Australian?
3) What was the scope of the business? Was the transaction a profit making scheme? 4) Is the receipt income or capital?
5) Where is it from if the company is not Australian?
Question 1: is there a business or primary production?
It is any profession, trade, employment, vocation or calling, but does not include the occupation as an employee. Usual characteristics: TR 97/11
* Significance of the commercial activity
* Purpose and intention of the taxpayer in engaging in the activity * Profit intention
* Regularity of activity
* Activity is or will be profitable
* Organisation and system
* Size and scale
Ferguson v FCT: the retired navy who leased cows
* He read the periodicals, maintaining a INFS and accounting records * Note: he will be quarantined under div 35 of ITAA 97 due to small scale FCT v Walker: the goat breeder
* He paid all the associated breeding fees
* Expected a profit
* Regular checking up and paying $
* No evidence of being a hobby
Watson v Deputy Commissioner of Taxation: the disabled businessman * Try to argue that his insurance compensation $ was used to cover his business loss * But those $ is not resulted from carrying a business!
Is it a hobby or a business?
Evans v FCT: the gambler
* Regular bet in the TAB but was not trained to gamble in a professional manner * Not carried on in a business like manner
* TOO addicted!
FCT v Stone: the police sportsperson
* All prizes, sponsorships and appearances are assessable * No intention to make a profit but that’s not determinative * She acted in a business like manner by seeking for sponsorships and signing contracts Shields v FCT: the AMP trader
* Unlike Evans, he fully utilized his skills and tried to arbitrage * Ran it like a business
Idea of intention: what is the scope of the business? Was there a profit making scheme? Californian Copper Syndicate v Harris
* The scope of the business of mining
* But they bought a land with a profit making intention. They didn’t even touch the mine before that! * Assessable!
Western Goldmines v DCT
* Another mining company
* Actually fully used up the land
* No intention to sell it when they first bought it. They want to exploit the land * NOT assessable
Scottish Australian Mining Co Ltd V FCT
* 3rd mining company
* After full use of the land, they subdivided and sold it * No intention to make a profit by reselling it
* This is considered to be a process of realizing capital because the land can no longer be used FCT v Whitfords Beach Pty Ltd- the fishing shack
* The case was very similar to Scottish Mining BUT! They transformed from a company which simply holds the land for domestic purpose for the shareholder to one that engage in commercial venture to make profit! * Despite it was originally bought for recreational purposes, after the transformation, it’s a different story! * Assessable!
After Whitfords, the case of property development
Statham v FCT: Passive v Active
* The taxpayer was a trustee for someone who was doing farming. That person was developing the land for sell. After his death, they were granted permission to subdivide the land * Found: they were forced sub divide the land- not in the business of subdividing the land * they didn’t even advertise the land for sale i.e. they were not active * they did nothing other than relying and engaging with the shire council * merely capital
Moana Sand Pty Ltd v FCT: mixed purpose sand case AUTHORITY! * A scheme can be profit making even if the dominant purpose isn’t! * they bought the property for 2 purposes: work/sell sand + sell the land afterward for a good price * Hence,...