Determining whether your boat hire activities amount to the carrying on of a business involves considering the general indicators of when a business exists. While no single indicator is determinative and the determination is based on the overall impression gained, the prospect of profit is highly significant when assessing if your activity has the character of a business.
The extent to which the boat owners participate in, and the effective control they have over, the operation of the charter activity is also an indicator as to whether a business is being carried on. This is shown by the level of services provided by the owner to the boat hirer (either directly or through the charter operator), in addition to hire of the boat – and the extent to which they share in the risks and rewards of the activity.
Excess deductions and losses from boating activities are not quarantined if you meet one of the following business exceptions. These activities must be carried on in the ordinary course of your business:
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- holding a boat as trading stock for sale.
- using or holding a boat mainly* for letting it on hire.
- using or holding a boat mainly for transporting the public or goods for payment.
- using a boat for a purpose that is essential to the efficient conduct of your business.
* Mainly, in these circumstances has to be analysed in both a quantitative as well as a qualitative sense. Whereas, a time comparison may suffice in the majority of cases, other factors, such as the withdrawal of the boat for private purposes for all or most of the peak season may indicate that the main purpose for holding the boat throughout the year was for private use.
Even if an exception applies to you, you may still have to quarantine losses under the deferral of losses from non-commercial business activities rules.
If you only provide a boat under a lease then generally you are not carrying on a boat hiring business. Nevertheless, the boat hire receipts will generally be assessable income. You will also be denied some credits for GST.