CA ANZ welcomes Inland Revenue’s draft interpretation statement PUB00478 on business activity, recognising its usefulness but recommending greater clarity and practical utility.

CA ANZ suggests revising the “indicators of business” table, noting that the reference to “significant assets” may not be appropriate for all activities (e.g. IT consulting) and should clarify whether “significant” refers to the type or scale of assets. 

On the profit intention test, CA ANZ recommends expanding the discussion to include objectively reasonable business plans, external funding support, and substantive commercial effort. It stresses that retrospective assessment based on whether a profit eventuated should not apply, and further analysis of what constitutes a realistic intention to profit would be helpful. 

On the scope and commencement of business, CA ANZ considers the draft’s approach too narrow, especially for start-ups operating in pre-revenue mode. It recommends acknowledging that software and technology start-ups may be carrying on a business absent revenue, and proposes adding a dedicated start-up example.