Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax Assessment Act 1997
1 Section 35 - 1
Omit:
It sets out a series of tests to determine whether a business activity is treated as being non - commercial.
The deferred losses may be offset in later years against profits from the activity or, if one of the tests is satisfied or the Commissioner exercises a discretion, against other income.
Substitute:
It sets out an income requirement and a series of tests to determine whether a business activity is treated as being non - commercial.
The deferred losses may be offset in later years against profits from the activity. They may also be offset against other income if the income requirement and one of the other tests are satisfied, or if the Commissioner exercises a discretion.
2 Paragraph 35 - 10(1)(a)
Repeal the paragraph, substitute:
(a) you satisfy subsection ( 2E) for that year, and one of the tests set out in any of the following provisions is satisfied for the business activity for that year:
(i) section 35 - 30 (assessable income test);
(ii) section 35 - 35 (profits test);
(iii) section 35 - 40 (real property test);
(iv) section 35 - 45 (other assets test); or
3 Subsection 35 - 10(2) (note)
Repeal the note, substitute:
Note 1: There are modifications of this rule if you have exempt income (see section 35 - 15) or you become bankrupt (see section 35 - 20).
Note 2: This rule does not apply if your excess is solely due to deductions under Division 41 (see section 35 - 10 of the Income Tax (Transitional Provisions) Act 1997 ).
4 Paragraph 35 - 10(2A)(a)
Repeal the paragraph, substitute:
(a) you satisfied subsection ( 2E), and one of the tests set out in any of the following provisions was satisfied for the business activity:
(i) section 35 - 30 (assessable income test);
(ii) section 35 - 35 (profits test);
(iii) section 35 - 40 (real property test);
(iv) section 35 - 45 (other assets test); or
5 After subsection 35 - 10(2D)
Insert:
Income requirement
(2E) You satisfy this subsection for an income year if the sum of the following is less than $250,000:
(a) your taxable income for that year;
(b) your * reportable fringe benefits total for that year;
(c) your * reportable superannuation contributions for that year;
(d) your * total net investment losses for that year.
For the purposes of paragraph ( a), when working out your taxable income, disregard any excess mentioned in subsection ( 2) for any * business activity for that year that you could otherwise deduct under this Act for that year.
6 Subsection 35 - 55(1)
After "may", insert ", on application,".
7 Subsection 35 - 55(1)
After "one or more income years", insert "(the excluded years )".
8 Paragraph 35 - 55(1)(a)
Omit "that or those income years", substitute "the excluded years".
9 Paragraph 35 - 55(1)(b)
Omit "the business activity has started to be carried on and, for that or those income years:", substitute "for an applicant who carries on the business activity who satisfies subsection 35 - 10(2E) (income requirement) for the most recent income year ending before the application is made--the business activity has started to be carried on and, for the excluded years:".
10 Paragraph 35 - 55(1)(b) (note)
Repeal the note.
11 At the end of subsection 35 - 55(1)
Add:
; or (c) for an applicant who carries on the business activity who does not satisfy subsection 35 - 10(2E) (income requirement) for the most recent income year ending before the application is made--the business activity has started to be carried on and, for the excluded years:
(i) because of its nature, it has not produced, or will not produce, assessable income greater than the deductions attributable to it; and
(ii) there is an objective expectation, based on evidence from independent sources (where available) that, within a period that is commercially viable for the industry concerned, the activity will produce assessable income for an income year greater than the deductions attributable to it for that year (apart from the operation of subsections 35 - 10(2) and (2C)).
Note: Paragraphs ( b) and (c) are intended to cover a business activity that has a lead time between the commencement of the activity and the production of any assessable income. For example, an activity involving the planting of hardwood trees for harvest, where many years would pass before the activity could reasonably be expected to produce income.
12 Subsection 35 - 55(2)
After "may", insert ", on application,".
13 At the end of section 35 - 55
Add:
(3) An application for a decision by the Commissioner under this section must be made in the * approved form.
Income Tax (Transitional Provisions) Act 1997
14 After Division 34
Insert:
Division 35 -- Deferral of losses from non - commercial business activities
Table of sections
35 - 10 Deductions for certain new business investment
35 - 20 Application of Commissioner's decisions
35 - 10 Deductions for certain new business investment
The rule in subsection 35 - 10(2) of the Income Tax Assessment Act 1997 does not apply for an income year to a business activity if:
(a) apart from that rule, you could otherwise deduct amounts under Division 41 of that Act for that income year; and
(b) the total of those amounts is more than or equal to the excess worked out under that subsection for the business activity for the income year.
35 - 20 Application of Commissioner's decisions
A decision of the Commissioner made under section 35 - 55 of the Income Tax Assessment Act 1997 :
(a) before the commencement of Schedule 2 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 ; and
(b) for one or more income years;
continues to have effect, after that commencement, for those income years despite the amendments made by that Schedule.
15 Application
The following apply in relation to the 2009 - 2010 income year and later income years:
(a) the amendments made by items 1 to 13 of this Schedule;
(b) section 35 - 10 of the Income Tax (Transitional Provisions) Act 1997 (as inserted by this Schedule).