There have been some significant changes to the non commercial loss provisions effective 1st July 2009. These may possibly impact on your ability to claim any losses returned on your business activities against your other income from this date.

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.

Commissioner’s Discretion
The Commissioner’s discretion to provide relief from these rules will continue to apply to all taxpayers notwithstanding their taxable income.

The Commissioner can exercise discretion 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.

An application for an exercise of the Commissioner’s discretion is in the form of a private ruling. The ATO have recently released an evidentiary checklist which now must accompany this form.

How Stable Financial can help
Our firm can assist in a variety of situations. These include:

» Providing an Export Report, as an independent expert, that examines the specifics of the horse breeding industry including the expected lag time on profitability, industry statistics and analysis, and industry norms and relates these back to your business;

» Exploring any restructuring opportunities that are available so that the taxable income of the affected individual is reduced below $250,000;

» Exploring any restructuring opportunities that are available so that business activity is transferred to an entity that is not caught by this legislation;

» Assisting with the preparation of the application for a Private Ruling, including assisting with the business plan and financial projections.

For further information, please contact our office or alternatively visit our website for a more detailed article on this subject.