Arthur operates a second hand shop and a dog obedience training business in a 50/50 partnership with his wife. The activities commenced in the year ended 30 June 1999. In the year ended 30 June 2002 each partner deferred a loss of $4,000, made up of $3,000 from the second hand shop and $1,000 from the dog obedience training business.
In the 2003 year the dog obedience training business is not carried on. The business records for the second hand shop for the year ended 30 June 2003 show the following results:
P/ship |
Arthur's share |
|
Total business income |
$10,000 |
$5,000 |
Total expenses |
$12,000 |
$6,000 |
Net income or loss for 2003 |
$2,000/L |
$1,000/L |
Deferred non-commercial loss for previous year |
$6,000/L |
$3,000/L |
Overall net income or loss for 2003 |
$8,000/L |
$4,000/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.
In 2003 Arthur can only show the deferred loss from the second hand shop partnership. He cannot include the $1,000 from the dog obedience training business as it does not relate to an activity which is the same of similar to his current year activity. The $1,000 prior year loss from the dog obedience training business is not shown in the 2003 income tax return.
Arthur should keep a record of the $1,000 deferred loss from the dog obedience training business, as he may be able to claim it if he later recommences it or starts a similar business.
Tax return completion
Arthur's tax return would include the following details:
Arthur 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 |
1,000/L |
Arthur's distribution from the partnership for 2003 |
Y |
3,000/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. Hence, only the prior year deferred loss from the second hand shop is recorded here. |
|
Y |
D (type box)1 |
All of the amount at Y is a deferred loss |
|
Net Non-PP distribution |
4,000/L |
The current year loss of $1,000 plus the deferred loss of $3,000 |
|
P3 (BPI) |
B |
1 |
Number of business activities |
P9 (BPI) |
D |
Second hand |
|
E |
52523 |
ANZSIC code required for tax agent prepared returns |
|
F |
P |
||
G |
8 |
Loss is required to be deferred |
|
H |
3,000 |
Prior year deferred non-commercial loss from this activity |
|
I |
4,000 |
Net loss for 2002-03 for this activity |
|
15 (Supp) |
F |
4,000 |
See item P9, label I |
H |
4,000 |
The sum of F & G |