| 1. |
In the May budget, the Government tightened the non-commercial loss rules to make it more difficult for high income earners to offset business losses against their other income.
|
| 2. |
Some taxpayers may still offset business losses against other income provided one of the following tests are satisfied:
• Assessable income test;
• Real property test;
• Other assets test; and
• Profits test.
|
| 3. |
The assessable income test requires that the taxpayer derives assessable income of $20,000 or more from the business activities during the income year.
|
| 4. |
The real property test requires that the business uses real property or an interest in real property with a value of at least $500,000. This can be determined using either the market value or reduced cost base methods.
|
| 5. |
The other assets test requires that the total value of all non real property assets used on a continuing basis in the business be at least $100,000 in value.
|
| 6. |
For the profits test to be satisfied, the business activity must have resulted in taxable income in at least three out of the past five years, including the current year.
|
| 7. |
Taxpayers with adjusted taxable incomes of less than $250,000 who satisfy at least one of the above tests can offset their business losses against their other income.
|