SUMMER 2010

Claiming Losses from Business Activity


If you have a net loss from a business activity you carry on as an individual, either as a Sole Trader or in Partnership, the non-commercial loss rules will apply.

In the 2009 Budget, the government announced changes to the non-commercial losses rules. These changes will further restrict the deductibility of business losses incurred in relation to non-profitable business activities. The measure will ensure excess deductions from unprofitable business activities cannot be used to reduce salary, wage and other income particularly high income earners.

However, a new exception has also been introduced for losses solely due to deductions claimed for the Small Business and general Business Tax Break in the 2009-10 and 2010-11 income years. This exception applies to all taxpayers. To find out whether you can use your business loss to offset income from other sources or not please contact our professional accountant for further discussion.

WINTER 2009

Work-related expenses: Back on the radar

Since work-related expenses are one of the most commonly claimed deductions, the ATO is launching a program telling people what they can claim in 2009.

Last year, 7.6 million people claimed deductions for work-related expenses, claiming $1,920 on average in work-related expenses, with the most commonly claimed items including car, travel, uniform and self-education expenses.

The Tax Office pays close attention to these claims in tax returns, finding claims that are false, are not work-related or which can’t be substantiated, in addition to common mistakes.

The Tax Office looks closely at tax returns from last year and identifies particular occupations where:

• average amounts of claims are high;
• there is an increase in the number of people making claims; and
• there are a lot of people making claims for the first time.

This year, the Tax Office will write to around 180,000 employees in the following occupations outlining common mistakes and providing advice on how to avoid these mistakes in this year’s tax return:

• truck drivers;
• sales and marketing managers;
• sales representatives; and
• electricians.

Some of the mistakes the Tax Office has seen from employees in these occupations include:

• Truck drivers – claiming motor vehicle expenses associated with transporting bulky tools, including travel to and from work. Other mistakes include claiming travel allowances they aren’t entitled to failing to keep appropriate records to support claims for internet and mobile phone use.
• Sales representatives, sales and marketing managers – over-claiming home office expenses such as rent, rates and electricity. Another common mistake is not keeping suitable records for mobile phone and internet use and failing to adjust claim for private use.

When claiming motor vehicle expenses, they should also ensure they keep an up-to-date log book, which includes starting a new log book when their circumstances change, such as changing jobs or purchasing a new vehicle.

• Electricians – claiming motor vehicle expenses for carrying bulky equipment even though their employer has advised there is no requirement to carry the equipment or the equipment does not meet the bulky provisions.

Other mistakes include claiming the living-away-from-home allowance then they’re not entitled to it and failing to keep a log book for expenses for a one tonne vehicle when it is used for both business and private use.