25th August 2010

STABLE FINANCIAL SUCCESSFULLY APPLIES
"TAX SLEEPER HOLD"!


Stable Financial are proud to announce that it has successfully assisted a client with a Private Ruling application to allow their 2010 and 2011 financial years horse breeding losses to be offset against their other assessable income. As the client's "adjusted taxable income" exceeded the new threshold of $250,000 these losses would have otherwise been quarantined.

"This was our first Private Ruling application to the Australian Taxation Office (ATO) in this area. Although we were convinced we had a strong case and had put the required effort into our application, it was still a nervous wait. It was very pleasing to get the positive result first up" commented Adam Tims, director of business advisors Stable Financial.

"The cashflow benefit to the client for the 2010 financial year was in the $100,000 range which, for a breeding business in the start up phase, is vitally important to assist in paying service fees and holding costs".

He added, "A satisfying aspect of the Commissioner of Taxation's decision in this case was his acknowledgement that because of our firm's horse specialization (75% of our clients operate in the horse industry) he accepted our statement regarding the industry's lag period as if it were from an independent source".

"We feel very confident that looking forward we can continue to help people caught by these new rules due to our horse industry specialisation and expertise", said Tims.

"We've cautioned Owners and breeders to plan ahead for the new $250,000 income test but we fear that it's a genuine "Tax Sleeper" and a serious wakeup call awaits those that are set to prepare their 2010 tax returns," said Adam Tims.

"The $250,000 threshold includes items such as Reportable Fringe benefits and superannuation contributions," said Tims and added, "If you are anywhere near this threshold and you are expecting to use your tax losses, you need to act now."

Recap of the Rule

From 1 July 2009, for individual taxpayers with an "adjusted taxable income" of over $250,000, any business losses will be quarantined (cannot be offset against other income) for utilisation against future profits of that business activity only. This is regardless of the fact that the business may have satisfied the existing commerciality tests.

The Commissioner can exercise discretion and allow the business losses to be utilized in one of two circumstances:

Events outside the control of the operator have prevented the activity from returning a profit. This may include bushfires, drought or other natural disasters; or

Because of the nature of the business activity, there is a period of time before it can make a profit. This lag period is due to the nature of the business activity.

In the second scenario, the Commissioner must be satisfied, based on evidence from independent sources, that the business activity will be profitable within a commercially viable period.

For further information, please contact Stable Financial on (03) 9629 3023 or email Adam Tims at atims@stablefinancial.com.au.

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Contact;
Adam Tims
Director – Stable Financial
03 9629 3023 or 0410 437 887