Supporting small businesses through their recovery - non-commercial losses
From fire to floods and COVID-19, I know the Australian community has faced more than their fair share of challenges recently. And I’ve seen how difficult this has been for so many hard-working small businesses. Businesses have shared their stories of recovery from losing so much back in December 2019 and January 2020, to then having to deal with the impact of COVID-19, and more recently damaging floods.
It’s stories like these that drove us to look at developing a practical compliance guideline (PCG) to help make it easier for individuals in businesses to recover and get on with their core business.
Right now, individuals in businesses need to defer a loss from a non-commercial business activity (like a hobby) to be offset against future income from that same activity, but our draft PCG may change this.
Draft PCG 2022/D2 Non-commercial business losses – Commissioner's discretion regarding flood, bushfire or COVID-19?will provide a safe harbour for individuals, including partners in a partnership, who:
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So, you might be wondering how this could affect you, or your clients.
Take Beth for example who runs a beekeeping business. During the December 2019 bushfire she lost half of her hives, meaning she returned a loss in that income year. Beth had previously made a profit in the 2018-19 income year. Meanwhile, Beth's other income remained stable, and she met the income requirement in the 2019-20 income year. Because Beth also kept evidence of how bushfire impacted her business activity, she would be eligible for the safe harbour.
Feedback is welcome on our draft PCG until 21 June 2022, so I encourage to have read and provide any comments you think we could use to help finalise the Guidance: ?https://www.ato.gov.au/law/view/document?DocID=DPC/PCG2022D2/NAT/ATO/00001