STATEMENT
The Tax Office has agreed 'administrative positions' with particular multi-level marketing distributors. An administrative position sets out: • Principles to be applied in determining whether a distributor is in business for tax purposes, and • methods of calculating the proportion of expenses which are deductible to a distributor who is carrying on business.
Where an administrative position exists staff must follow the guidelines set out in that administrative position, so that the Tax Office: • Applies the principles agreed with the industry • takes a consistent approach when deciding whether a taxpayer, undertaking activities as a multi-level marketing member/distributor, is carrying on a business, and • takes a consistent approach to the apportionment of expenses by taxpayers who are carrying on a multi-level marketing business.
The Tax Office has released administrative positions with: • Amway of Australia, and • Omegatrend Australia Pty Ltd. The Tax Office will also, in appropriate cases, seek to agree administrative positions with other organisations which operate in a similar manner to ensure that their members/distributors are treated consistently for tax purposes.
These administrative positions (along with other relevant information) are available for Tax Office staff on ATOconnect , and for all interested parties on the Tax Office website: www.ato.gov.au . • www.ato.gov.au/corporate/content.asp?doc=/content/amway.htm (for Amway); and • www.ato.gov.au/businesses/content.asp?doc=/content/23221.htm (for Omegatrend).
EXPLANATION
If a taxpayer does not apply the applicable administrative position then their liability will be determined on a case by case basis. The question whether activities constitute a business will be based on the business indicators which various Courts and Tribunals have formulated and applied in determining whether an activity constitutes a business for taxation purposes. These business indicators are described in the Tax Office brochure ' Am I in Business? ' (NAT 2598-4.1998), and also in Taxation Ruling TR 97/11 'Am I carrying on a business of primary production?'.
In any specific case, if it is determined that the activities do constitute a businesss, taxpayers and Tax Office staff need to consider the application of the non-commercial loss provisions to thos activities. For information about the non-commercial business loss provisions, see Taxation Ruling TR 2001/14 - Income Tax: Division 35 - non-commercial business losses. Further information is also contained in the Tax Office fact sheets: • Non-commercial losses: overview (Nat 3379) • Non-commercial losses: the other assets test (Nat 3380) • Non-commercial losses: the profits test (Nat 3381) • Non-commercial losses: the real property test (Nat 3382) • Non-commercial losses: the income test (Nat 3383) • Non-commercial losses: similar business activities (Nat 3384) • Non-commercial losses: partnerships (Nat 3385) • Non-commercial losses: Commissioner's discretion (Nat 3386) These fact sheets can be accessed on the Tax Office website: www.ato.gov.au