08 Oct 2015

Claiming losses against your income

Case Study
Frank is a lawyer in the city who has an adjusted taxable income of $290,000 a year. His wife Margaret is an office manager with an income of $39,000. They run a beef cattle farming operation in partnership which is currently running at a loss of $30,000 a year. The value of the land where they operate their farming business is $600,000. They are trying to work out whether they can claim their farming losses against their employment income.

Items to consider
Provided adjusted taxable income is less than $250,000, one of the four following tests must also be passed in order to offset business losses:

  • Land value for business operations being over $500,000;
  • Gross sales turnover more than $20,000 p.a.;
  • Profit in three of the last five years including the current year;
  • Other business assets with a value over $100,000

Margaret is able to offset her 50% of the farming losses reducing her taxable income to $24,000, as her income from other sources is less than $40,000. However Frank is over the $250,000 threshold and therefore he has to carry forward his share of the farming losses until a year in which his income is less than the threshold.

Should you wish to discuss further please feel free to contact Andrew Marshall or Janine Orpwood on 5427 8100 for an initial consultation.


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