What is a Business? [next]
When you have studied this page you will have more of an idea of what a Small Business is.
There is always someone who knows EVERYTHING and will pass on his wisdom to all and sundry. However, as in TaxPlanning and Croquet, Folk Lore does not get past the Referees and only serves to make life more difficult for the unskilled, information seeker.
A technical definition of "business" is not of much value, but the Australian Income Tax Assessment Act provides at Section 6 Interpretation:- "business" includes any profession, trade, employment, vocation or calling, but does not include occupation as an employee. ----- Sorry about that, employee!
Australian Tax Office - ATO:
However, it might be prudent to understand the point that one can "own a business" or "be in business". If you own a (sole) business outright or in Partnership the Tax situation is understood and you simply file an extra but separate ATO Individual Tax Return called the Supplement etc. which allows for TaxPlanning
Company Structure = Employees
But if you are "in business" in a Company structure etc. you are only a shareholder. If you are employed by that Company as the General Manager, Chief Executive Officer or storeman you are an employee (servant) of the Company. You are recognized by the ATO as a wage earner on PAYE - Pay As You Earn - Tax, and are not able, as such, to personally TaxPlan. ---- Simple as that!
NB. A Company Executive, storeman etc. might receive a Fringe Benefit which is taxed at the highest rate. The benefit is received without the attendant risk that a sole business owner would have had in obtaining that same benefit (of a car, tax deductible family holidays on the Gold Coast, etc.)
One of the myths of Australian society is class distinction. There certainly is a class distinction. Rich and Poor. Master or Servant. Employer or Employee. Broke or Wealthy. But only when it comes to Income Tax is it of any real value to belong to one class or the other. Presumably the poor have as much fun as the rich - for the best things in life are free - except Croquet, which costs the Rich about $5 per week.
So how do We Distinguish a "Business" from None
The Australian Tax Office does not require that a business is making a profit to be a "business" - or that something making a profit is a "business". It has the following critera for it to be more likely to be "business" if:-
large scale operation and/or
(2) involves employees and/or
(3) frequent acts/transactions and/or
(4) conducted with a view to profit and/or
(5) profitable and/or
(6) conducted over a long period and/or
(7) conducted continuously and systematically and/or
(8) in commercial premises and/or
(9) involves items typically dealt with commercially and/or
(10) involves exercise of specialized knowledge and/or
(11) significant capital investment and/or
(12) business records kept and/or
(13) full-time and/or
(14) market research done and/or
(15) associated with other commercial activities of taxpayer and/or
(16) existence of business organization, registered business name and/or
(17) advertising and/or
(18) active -
you might see "and/or" leaves a bit to be desired - if you desired to own a "business"
It is not the function of an ATO employee (Public Servant) to say you are in business or not. It is basically your Freedom of Choice. A solicitor or accountant or the wise man in the corner bar of the local, can't make that decision for you - even if he charges you like a wounded bull --- or drinks all your beer.
Some ATO person may consider your business as a "hobby" for the ATO person might (might) consider the loss of a little tax as being more acceptable to him (to the ATO?) Because a new Small Business Family can attach itself to an immediate $50,000/annum none taxable income. This, with the handy addition of $50,000/annum income loss (for Tax purposes) due to deductions and depreciations.
In a servant's or employee's income, these would not be tax deductible - which is why the poor want the rich to pay more tax.
With the *"Vampire" program able to turn $15,000/annum "Cash" into $300,000/annum of "Money" for Tax purposes - for about $250/annum (and which is Tax Deductible) - it seems hard to believe, even strange, that 80% of new Businesses go broke in three years.
(*It's just a computer application to rob Banks legally --- which we call "fair enough" but Banks call "immoral")
The Australian Tax Office expects you to be the Tax Expert in your affairs - not the ATO employed clerk.
Sometimes, the so called "cash economy" is the result of an ATO "hobby" stamp rather than from backyard (as opposed to rental), "illegal" or immoral operations. Which might take away income from the more "moral" or licensed operators.
Moral/licensed operators have the same "Freedom of Choice" to complain to the media and/or Local Government etc. as the backyarder has the "Freedom of Choice" to do his thing. Who's "Freedom of Choice" has the better case is the province of the Courts of Justice ---- or how much "cash" it costs to bribe whoever - hence the name "Cash" Economy.
Some consider that all Australians should have the "Freedom of Choice" but within reason ----
But within who's reason?
The Polly's? Ho! Ho! Ho!
The Union's? Ho! Ho! Ho!
The Media's? Ho! Ho! Ho!
Religious? Ho! Hum!
The poor? Oh Dear!
A Public Servant's? You're kidding.
Any Servant's? Truely?
Within your reason?
Who the @#%$&#*#@ are you?
The Lucky Country:
This Australia is the "Lucky Country" because of it's "Freedom of Choice" and its Tax "Choice Principle". People who don't adhere to that Freedom and that Principle (at least for others) should leave at once.
Folk Lore is Rubbish.
However, it might be better for a "hobby" operator to keep a set of good books. The future may have his hobby into a "legitimate" business. Then there is a possibility of retrospection - with a nice tax refund - if the 'hobby" grows into a business and was carried on while with paid PAYE job as a day time employee.
You might get all your Income Tax back.
Best Case Scenario:
Why put it off? Do it now. Own a Business. All it takes to be in "business" is to say the words "I'm in Business" and start keeping a set of books, ETC. You have to start your apprenticeship sometime - either as a Business Person or as a welfare recipient - and the former might have more fun and less worry.
But help is available for the ETC. bit at:-
Gold Coast TaxPlanning/Croquet Seminars:
[NEXT] [BACK] [THIS INDEX] [MAIN INDEX] [COMMENT] [HOME PAGE] [E.mail]
More Info? Click here