Carrying on business - need for a definition?

Cases concerning the meaning of ‘carrying on business’ for the purposes of the Income Tax Assessment Act 1936 and 1997 date back to the introduction of the Federal Income Tax System yet its meaning is still the subject of contentious litigation today. Is there a case to mount for defining ‘carrying on business’ for the purposes of the Income Tax Assessment Act? This paper looks at that question. The meaning of ‘business’ is also an issue for the purposes of the GST legislation as the definition of enterprise for GST purposes includes a ‘business’ and we fall back to the income tax cases concerning the meaning of ‘business’ that is not absolute or clear. Currently the question as to whether an activity constitutes ’carrying on business’ is determined by the application of a number of factors that have evolved from case law yet no particular factor is determinative. The recent decision of the High Court of Australia in Federal Commissioner of Taxation v Stone 2005 HCA 21 demonstrates the current approach to establishing the existence of a ‘business’ lacks certainty, a fundamental requirement of a good tax system. This paper looks at what options are available and the extent to which the recently introduced non-commercial loss provisions in Division 35 of the Income Tax Assessment Act 1997 have dealt with the uncertainty associated with the meaning of ‘carrying on business’.