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Ruling
Subject: Entrepreneur's tax offset
Question 1
Are you entitled to claim the entrepreneur's tax offset under section 61-505 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
no
This ruling applies for the following periods:
1 July 2010 to 30 June 2011
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are a private company.
In the 2011 income year your turnover was below $75,000.
This income was interest earned from cash deposits held by banks.
You did not undergo any business activity in the 2011 income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 61-500
Income Tax Assessment Act 1997 section 328-10
Income Tax Assessment Act 1997 section 995-1(1)
Reasons for decision
Summary
You are not able to apply the entrepreneur's tax offset in the 2011 income year.
Detailed reasoning
Entrepreneurs Tax Offset
Subsection 61-505(1) of the ITAA 1997 states:
You are entitled to a tax offset for an income year if:
· you are an individual or a company; and
· you are a *small business entity for the year; and
· your aggregated turnover for the year is less than $75,000; and
· you have *net small business income for the year.
Essentially, you are a small business entity for an income year if you carry on a business and your aggregated turnover in the current or prior year was less than $2 million. (Section 328-110 of the ITAA 1997).
Carrying on a business
Section 995-1(1) of the ITAA 1997 defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'.
In your case, you are a company who has previously been a small business entity.
In the 2010-11 income year you were not carrying on a business and all income was received from 'passive' investments, being interest on bank deposits.
You are therefore not eligible for the entrepreneur tax offset in the 2010-11 income year.