Activity one
Frank owns a rental property in a 50/50 partnership with his brother. The partners have earned rental income since the year ended 30 June 1999.
The same passive investment is carried on by the partnership in the year ended 30 June 2003. In 2003, the business records for this activity for the year ended 30 June 2003 show the following results:
P/ship |
Frank's share |
|
Total rental income |
$26,000 |
$13,000 |
Total rental expenses |
$43,800 |
$21,900 |
Net income or loss for 2003 |
$17,800/L |
$8,900/L |
As the partnership is not carrying on a business activity the loss from the rental property is not subject to the non commercial loss rules. The loss from this activity does not need to be deferred. The processing of an electronically lodged return prepared by a tax agent under the ELS involves the requirement that item P9 in the BPI be completed whenever there is a loss shown at item 12, even though the loss may be from an activity that is not a business activity.
The brothers have lodged a partnership return, and as such, they are both required to also complete item 12 of the individual return form supplement, but not also item 20. As an alternative to lodging a partnership return, the brothers could have provided details of their share of all the relevant income and deductions in their own returns, at item 20, as per page 7 of the 2003 Partnership and Trust return instructions.
Activity two
Frank also operates an olive growing business activity as a sole trader. This activity commenced in the year ended 30 June 2002. In the year ended 30 June 2002 Sam received written advice from the Tax Office that the Commissioner would exercise his discretion to allow Frank to claim a loss from the olive growing business activity for several years including the year ended 30 June 2003. The loss from this activity is not deferred.
In 2003, the business records for this activity for the year ended 30 June 2003 show the following results (included in Item P8 of the BPI schedule):
Total business income |
$2,400 |
Total expenses |
$9,200 |
Net income or loss for 2003 |
$6,800/L |
Tax return completion
Frank's tax return would include the following details:
Frank will also require a copy of the 2003 Business and Professional Items schedule (BPI) and the 2003 Taxpack supplement (Supp).
Item |
Label |
Amount |
Comment |
12 (Supp) |
O |
8,900/L |
Frank's distribution from the partnership for 2003 |
Net non-PP distribution |
8,900/L |
||
P8 (BPI) |
Total business income |
2,400 |
|
Total |
9,200 |
||
B |
6,800/L |
Total business income less total expenses |
|
D |
nil |
No prior year deferred non-commercial loss |
|
Y |
6,800/L |
Transfer to Item 14 label B |
|
14 (Supp) |
B |
6,800/L |
From label Y item P8 |
P3 (BPI) |
B |
1 |
Number of business activities. The rental activity is not considered to be a business activity. |
P9 (BPI) |
Activity one |
||
D |
Rental property |
||
F |
P |
||
G |
0 |
Loss is from a distribution from a passive investment operated by a partnership |
|
H |
Nil |
||
I |
8,900 |
Net loss for 2002-03 for this activity |
|
Activity two |
|||
J |
Olive Growing |
||
K |
01190 |
ANZSIC code required for tax agent prepared returns |
|
L |
S |
||
M |
5 |
Commissioner's discretion exercised to allow the loss to be claimed in 2003. |
|
N |
Nil |
No prior year deferred non- commercial loss from this activity |
|
O |
6,800 |
Net loss for 2002-03 for this business activity |
|
15 (Supp) |
H |
Neither loss needs to be deferred |
|