Thursday 16 March 2017

ARGUMENT ON WHETHER TAXPAYERS RUNNING A BUSINESS






Earning opportunities are based on various work activities. By conducting business on different sectors, earning can be confirmed. With business taxation, process is related and in order to earn more than requirements, it is important to follow all rules and regulation of taxation. Not all working activities are described as business. When production of any working activity exceeds the requirements then it called as business. If any person produces something or conduct any work activity for their requirement and maintain the limitation of production, then it can be call as hobby instead of business.
Conducting any kind of jobs or working activities not directly related to business. There are differences between the working activities, which can be considered as business or cannot be considered as business. Business process is depended upon various activities and indicators. If indicators of business match working activities of any person then it can undertake the process of taxation. Based on information in Ferguson v FCT (1979) 9 ART 873, there is some difference in activities of business process or non-business process. If any person conducting the activity maintains regularity of process and doing it continuously, then it is indicator of business. A systematic way of record keeping of the activities is an indicator of business.
Scale of activities also indicates the business. If activities exceed the need then it can consider as business. On the other hand, the work process that is continuing as hobbies is not under business process.
Case study: Thomas v FCT (1972) 3 ATR 165
Based on information of Thomas's case study it is clear that the activities of Thomas cannot be considered as business. As per the information, Thomas provides taxes for his 7.5-acre land and in his land he is planting trees. Tree plantation process is a kind of hobby. A hobby cannot be a business. It can be considered as a small kind of business, but the activities of Thomas are not indication the business system. Tree plantation is a type of agriculture, which can be called as domestic agriculture. To use the resources for domestic needs and the limitation of production can consider this as hobby[1]. Transaction process makes changes in activities of hobby and it becomes small business type. Reviewing case study of Thomas, it can be said that there was no process of transaction and business indicators, so it is clear that it is a non-business activity.
In the findings of this case study, it is not important to consider any activity of taxpayers as business. However, Thomas provides taxes but it is for his land not for tree plantation. The activity of tree plantation is a hobby, not business[2]. It can be said that not all earning activities of taxpayers are business.
Case study: Martin v FCT (1953) 90 CLR 470
All earning activities can not consider as business. Taxpayers can conduct any kind of domestic earning activities but that cannot be under the taxation process. If the taxpayers conduct recreational earning process, then it will be considered as their domestic earning instead of business process. In the case of Martin, he is a taxpayer for his hotel business but in case of gambling it was not his business. Their regularity in that process of earning cannot be considered as his business[3]. Martin conducts this learning process for his part time activity and hobby. This kind of activity can consider as hobby, not as business. However, the records of bank balance referring the proof of increase in his income but it is within his requirement and domestic earning process. The gambling process is only for the entertainment and it is not indication factors of business. Gambling is one of the non-business activities and it is maintaining the non-business rules and factors[4]. As in case of Martin, there is no evidence of business indications and he conducts the betting process as his recreational activity so it can be said that this taxpayer is not running a business.
After conducting the study on case studies, it is clear that other earning activities of taxpayers cannot be considered as business. If the activities do not provide the indication of business and production of that activity maintain the scale of requirement then it can consider as a hobby. As per judgment of courts, activities like tree plantation and gambling are not a business. Recreational activities do not come under business and taxation process.



[1] Hopper, Jeffrey D., "Benefits Of Inmate Employment Programs: Evidence From The Prison Industry Enhancement Certification Program" (2013) 11 Journal of Business & Economics Research (JBER)

[2] Tsaioun, Katya, "Evidence-Based Absorption, Distribution, Metabolism, Excretion (ADME) And Its Interplay With Alternative Toxicity Methods" [2016] ALTEX

[3] Winkler, A. D. and M. A. Webster, "Turning Silver To Gold - Blue-Yellow Asymmetries In Color Perception" (2014) 14 Journal of Vision

[4] Wurtenberger, G., "Intellectual Property Law Of Plants" (2014) 9 Journal of Intellectual Property Law & Practice

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