Martin is a lawyer who earns $300,000 per annum. He also purchased a small farm in the Adelaide Hills (now worth $800,000) as a way to reduce his taxable income as he plans to sell just a few livestock every now and then. If in this last tax year Martin had sales of livestock of $14,000 (his total income from the farm) and incurred farm expenses of $38,000, can he use the loss from his small farming business to reduce the tax payable on his lawyer's salary of $300,000?

Question

Quizplus · Accepted Answer

The non-commercial loss rules prevent taxpayers from using losses from unprofitable business activities to reduce the tax payable on other income, unless certain conditions are met. Martin's farming activity, with expenses exceeding income and not meeting specific tests (like the assessable income test or the real property test), would likely result in the loss being deferred under these rules.

Martin Is a Lawyer Who Earns $300,000 Per Annum