Mary operates a picture framing business in a 50/50 partnership with her husband. This activity commenced in the year ended 30 June 2002. In the year ended 30 June 2002 each partner deferred a loss from the activity of $5,000.
The same activity 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:
P/ship |
Mary's share |
|
Total business income |
$18,000 |
$9,000 |
Total expenses |
$24,000 |
$12,000 |
Net income or loss for 2003 |
$6,000/L |
$3,000/L |
Deferred non-commercial loss for 2002 |
$5,000/L |
|
Overall net income or loss for 2003 |
$8,000/L |
For both income years:
- the primary production and professional artists business exception in subsection 35-10(4) does not apply
- the activity does not satisfy any of the four tests in Division 35:
- the assessable income test (s35-30)
- the profits test (s35-35)
- the real property test (s35-40)
- the other assets test (s35-45), and
- the Commissioner's discretion in s35-55 has not been exercised.
Mary's overall net loss of $8,000 for the 2003 income year must be deferred to the next income year that the activity, or one of a similar kind, is carried on.
Tax return completion
Mary's tax return would include the following details:
Mary 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 |
3,000/L |
Mary's distribution from the partnership for 2003 |
Y |
5,000/L |
A prior year deferred loss is recorded here only if the loss is from an activity which is the same or similar to the current year activity. |
|
Y |
D (type box) |
All of the amount at Y is a deferred loss. |
|
Net non-PP distribution |
8,000/L |
||
P3 (BPI) |
B |
1 |
Number of business activities |
P9 (BPI) |
D |
Picture Framing |
|
E |
23290 |
ANZSIC code required for tax agent prepared returns |
|
F |
P |
||
G |
8 |
Loss is required to be deferred |
|
H |
5,000 |
Prior year deferred non-commercial loss from this activity |
|
I |
8,000 |
Net loss for 2002-03 for this activity |
|
15 (Supp) |
F |
8,000 |
See item P9, label I |
H |
8,000 |
The sum of F & G |