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Edited version of private ruling
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Ruling
Subject: Non-commercial losses - Assessable income test
Question:
Are you able to apportion the $20,000 threshold for the purposes of the assessable income test in section 35-30 of the Income Tax Assessment Act 1997 (ITAA 1997) where you conduct your business activity over a full year but on a part time basis?
Answer: No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You manufacture products which you then sell at markets every weekend
You would spend approximately X Saturdays and Y Sundays a year on this activity.
You also have full time employment.
In the 2009-10 financial year, this activity produced less than $20.000 in assessable income.
The activity produced an overall loss in the 2009-10 financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Division 35
Income Tax Assessment Act 1997 - Section 35-30
Income Tax Assessment Act 1997 - Paragraph 35-30(b)
Reasons for decision
Division 35 of the ITAA 1997 sets out four tests to determine the commerciality of a business. These are the assessable income test, the profits test, the real property test and the other assets test.
In broad terms, the assessable income test requires at least $20,000 of assessable income in that year from the business activity (section 35-30 of the ITAA 1997).
There is nothing in the legislation that allows for any reduction in the $20,000 threshold. Therefore, your activities must produce at least $20,000 of assessable income in order to pass the test.
Where a business activity is not in operation for the whole of an income year, paragraph 35-30(b) of the ITAA 1997 applies, so that the Assessable income test is then based on a reasonable estimate of what the assessable income from the business activity would have been if the activity was carried on for the whole of that year.
In your case, your business activity has been carried on for a full year but on a part time basis and less than $20,000 of assessable income produced is your full year earnings. No pro-rata or estimation is available under paragraph 35-30(b) of the ITAA 1997.
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