Taxation Determination

TD 94/6

Income tax: abnormal income of artists, sportspersons etc: can eligible taxable income be a negative amount for the purposes of Division 16A of Part III of the Income Tax Assessment Act 1936 , so that a loss can be recognised from eligible activities and used to reduce average eligible taxable income?

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FOI status:

1. No. The definition of 'eligible taxable income' in section 158J does not envisage a loss. Eligible taxable income of a taxpayer is defined as '....the amount (if any) remaining after deducting from eligible assessable income....' any of those deductions specifically mentioned. The words 'if any' suggest that there may be no income in some cases. This implies that eligible taxable income cannot be a negative amount.

2. Since eligible taxable income cannot be a negative amount, the amount of loss in a relevant year for the purposes of determining the average eligible taxable income in section 158K cannot also be negative.

The loss is treated as a nil amount.

Example:

		1988	1989	1990	1991	1992	Total
		$	$	$	$	$	$
Eligible Assessable Income	A	8000	6000	9000	8000	5000	36000
LESS Related Deductions	B	2000	7000	12000	2000	6000	29000
	A-B = C	6000	(1000)	(3000)	6000	(1000)	7000
ELIGIBLE TAXABLE INCOME	D	6000	NIL	NIL	6000	NIL	12000
Ineligible Assessable Income	E	5000	4000	10000	3000	7000	29000
LESS Deductions	F	-	500	1000	-	-	1500
INELIGIBLE TAXABLE INCOME	E-F=G	5000	3500	9000	3000	7000	27500
TAXABLE INCOME	C+G=H	11000	2500	6000	9000	6000	34500

The taxpayer is assumed to be a resident throughout the above years of income. For the 1989, 1990 and 1992 years eligible taxable income, being a negative amount (row C), is to be treated as 'nil' for Division 16A purposes (row D). The average eligible taxable income in accordance with section 158K, for the 1992 year, would be $3000 (ie. 1/4 of the total eligible taxable incomes of the preceding four years of income, that is, Total column row D).

Commissioner of Taxation
20/1/94

Previously issued as Draft TD 93/D271

References

ATO references:
NO MPS 2002/1

Subject References:
abnormal income;
average eligible taxable income;
eligible taxable income

Legislative References:
ITAA Pt III Div 16A;
ITAA 158J