George carries on a garden maintenance business in the years ended 30 June 2002 and 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 |
$2,500 |
Total expenses |
$2,000 |
Net income or loss for 2003 |
$500 |
Deferred non-commercial loss for 30 June 2002 |
$1,000/L |
Overall net income or loss for 2003 |
$500/L |
For both income years:
- the primary production and professional artists 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.
The overall result is that George was able to recoup $500 of the $1,000 deferred non-commercial loss from the year ended 30 June 2002. This is the profit earned from the business activity during the year ended 30 June 2003 (excluding the $1,000 loss from the year ended 30 June 2002). The remaining $500, of the 2002 deferred loss, is deferred to the next year the activity, or one of a similar kind, is carried on.
In 2003 the profit of $500 (the excess of income over expenses not including the loss deferred from the previous year) would mean the activity is profitable in this year. Therefore, 2003 can count as one of the years the activity has produced a profit for the purposes of the Profits test in section 35-35.
Tax return completion
George's tax return would include the following details:
George will also require a copy of the 2003 Business and Professional Items schedule (BPI) and the 2003 Taxpack supplement (Supp).
Item |
Label |
Amount |
Comment |
P8 (BPI) |
Total business income |
2,500 |
|
Total |
2,000 |
||
C |
500 |
Total business income less total expenses |
|
E |
1,000/L |
Deferred non-commercial loss from the previous year |
|
Z |
500/L |
Transfer to Item 14 label C |
|
14 (Supp) |
C |
500/L |
From label Z item P8 |
P3 (BPI) |
B |
1 |
Number of business activities |
P9 (BPI) |
Activity 1 |
||
D |
Gardening Service |
||
E |
95250 |
ANZSIC code required for tax agent prepared returns |
|
F |
S |
||
G |
8 |
Loss is required to be deferred |
|
H |
1,000 |
Prior year deferred non-commercial loss from this activity |
|
I |
500 |
Net loss for 2002-03 for this business activity |
|
15 (Supp) |
G |
500 |
See item P9, label I |
H |
500 |
The sum of F & G |