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Tuesday 20 November 2007
HORSEMAN DEFEATS TAXMAN
The Administrative Appeals Tribunal (“AAT”) in Perth has overturned an earlier ATO decision regarding “Income tax – GST – whether horse and sheep breeding activities were a business or a hobby or recreational pursuit”. The decision made by the AAT on 26 October 2007, known as Block and Commissioner of Taxation (2007), is of particular interest to horse industry participants as it is a recent, favourable case for the taxpayer.
Adam Tims of Martin O’Connor & Partners commented on various noteworthy aspects of the case; “
1. The AAT acknowledged that a business can incur significant losses. The income tax losses in this case for the years under review are as follows;
- 2001 - $143,955;
- 2002 - $199,750;
- 2003 - $208,401;
- 2004 - $169,913.
Paragraph 85 of the AAT decision is worth noting, “It is clear that the first applicant has incurred significant losses in respect of the business because of the capital costs of setting up the business, the subsequent restructuring of the business and, as a result of a series of unforeseeable setbacks”. Further, paragraph 87 states that the couple “..conducts the business in a proper business like and commercial manner with an intention of making profits”;
2. The AAT reaffirm the view that the racing of horses, especially fillies, can represent an important aspect of one’s horse breeding business;
3. An investment in a property and suitable infrastructure for horse activities appears to be a very important indicator as to whether or not a horse business exists;
4. The maintenance of proper books and records and a business plan continue to be an important (although not mandatory) indicator as to whether or not a business exists;
5. The expertise and knowledge of the individuals involved in the business is also an important business indicator. “
- Ends
PLEASE CONTACT:
Adam Tims
Phone (03) 9629 3023
Email:
This media release is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific professional advice. No responsibility for loss occasioned to any person acting on or refraining from action as a result of this media release can be accepted.
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