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I work full time with an annual income of $65k, I also run an eBay business that has a turnover of $50k this year, my net margin is around 5%, which is $2500. If I purchase some eligible assets under $20k and write off the full amount this year, then am I able to offset the loss of $17k against my income from day time job? Does that mean I am only liable for tax on $48k ($65k minus $17k)?
Responses
Hi Thomas,
Unfortunately no, you are not able to offset company losses against PAYG income tax. If you make a loss in your eBay business it has to be carried over in the business until the business reaches profitability.
I would never recommend spending money to save tax - you have to give away 70% to save 30% which doesn't make sense - you should only be purchasing those assets if they are going to increase your income earning capacity
Best of luck
Regards
Scott
Hi Thomas
Given the facts you would be able to offset the business loss against you other income.
Assumed the following per info provided:
Business Income: $50k
Salary Income: $65k
Net Business Loss: -$17k
To be eligible to offset business loss against other income you must meet the income requirement/eligibility first: Other Income less than $250k. You meet this
You must then pass one of the four tests:
1. Assessable Income Test: Business Income of at least $20k; or
2. Profit Test: 3 out of past 5 years profit; or
3. Real Property Test: Value of Real Property continuously used in business to be at least $500k; or
4. The other assets Test: Value of assets (excluding real property, cars and other vehicles) to be at least $100k
Conclusion: You can offset
You are eligible as your other income is less than $250k
You pass at least one test - Assessable Income Test for sure (not sure about the others as there is limited information)
Regards
Suresh Rajani
Hi Scott,
Thanks for your advice.
The company structure of my eBay business is a sole trader, I thought I am eligible for Non-commercial losses. "If you're an individual in business, as either a sole trader or in partnership, and your business makes a loss, you may be able to offset the loss against your other income such as salary and wages."
I thought the above should apply, any comments?
Hi Thomas,
There is an opportunity to offset sole trader losses but my understanding was that they applied most commonly to arts and primary production. I would definitely ask a tax professional to assess the specifics of your case before taking action.
I still wouldn't be spending $20,000 just to save $6500 of tax. If the equipment will help you make substantially better profit then go for it
Cheers
Scott