[**Sam**]

I'm hoping someone can help me out with a basic understanding of how this works, yes I could ring DH's accountant but they're not overly tolerant of stupid questions and I just don't have the $65 per phone conversation available right now. And of course, I've seen before how many incredibly knowledgeable people hang out here.

Let's see how complicated I can make this......... DH and I have formed a partnership and purchased a takeaway shop, which has in the last three months done appallingly badly. So far we're up to $9000 in personal funds we've sunk into it to pay running costs and it's still sitting on a nearly $20,000 loss for the quarter. DH isn't worried, as he believes that the loss can be offset against his own personal expected income of about $70,000 at the end of the year plus he thinks that somehow we can claim back the money we've personally put in as a tax type thing too. Which would drop our taxable income and would in turn lower my centrelink estimate and increase the famiy payments so I might be able to keep the family afloat too. Let's just say I'm sceptical.

I thought that we might be able to offset some of the loss depending on the rules, but would just have to take a dive on the personal money we've put in until such time as the business can make money and afford to repay us .......does that make any sense at all?

I've tried to find my way through the ato website, but it's not giving me much joy..... much the same as when I tried to find out info about what gst I should be paying. Anyone have any ideas on that one for me too? I've been through the very limited paperwork forwards, backwards and upside down, and I can still only find that I have to pay gst on every single thing I sell as it's all premixed, or precooked except fresh uncooked fish (which I sell about $2 a week of) and bottled water (maybe around $8 a week). So I was planning to just pay gst across the board on all my sales figures to make life easier.....but now I've found from the purchase summary that the previous owners (who aren't willing to talk to me) declared $48000 in gst free sales last year out of $188 000 total sales. What the hell could they have been selling gst free??? Am I losing the plot, is there something legitimate I've missed here? Or were they just dodgy as anything? Can anyone shine a little bit of light for me on anything?

[littlebeetle]

I do our tax myself using a tax pack as have found that accountants we've used before charge to much for me to tell them what mistakes they have made.

I'd suggest grabbing a current year tax pack (from a newsagent or order online at ATO site for free postal delivery - takes 2 days) and going through the section on losses in that. I find the ATO website confusing and not easy to follow so appreciate why you might not have much luck looking there. The tax pack usually has common situations and works through examples, yours does not sound to out of the ordinary so could well be covered in a bit of detail.

I'd also suggest ringing the ATO/tax pack helpline and ask them about it as if you were trying to fill in your tax pack. I usually find them helpful and you don't have to give personal details or TFN if you don't want to. If you do ring up though I would read up a bit first and maybe do a bit of a breakdown of you total losses and money you put in, your income, spouses income etc so you can talk through your situation with the person in an ordered fashion IYKWIM as they tend to work through whatever it says in the tax pack anyway.

I have a feeling though that you will have to wait 'til the end of the fin year to receive any relief as a result of the loss but haven't been in that situation so not sure.

[lishermide]

Let me start by saying I'm no guru in this area, I can only tell you from my own experience.

I have had my own business for a few years now. The business made a loss in the first few years. I will finally be able to write it off against income this year Apparently you can't write a commercial loss off against personal income, you just carry it forward until you make a commercial income.

Hopefully one of our more knowlegeable EB'ers will come along

[sunnigirl]

Hi Sam,

Yeah it is quite a complicated area when you're not used to it! I'll see if I can help out a bit...

Firstly, the PP is referring to the 'non-commercial loss' rules. Pretty much this means if the loss from a business is not considered 'commercial' it cannot be applied against any other income, rather it is carried forward to offset any future profits the business may make.

However, if your business doesn't fall under those loss rules you can claim the loss in your tax returns (this will be half each for both of you presuming you are a 50/50 split p'ship) at the end of financial year. The loss you claim is the partnership's loss and may not necessarily be equal to the amount of money you have put into the business during the year. This is what your accountant will calculate. Also as there is a bit to the non-commercial loss rules I'd suggest doing a search on the ATO website for it however if your sales are around the amount the previous owner reported you will be fine.

You will apply this loss to your income, so say you had other income (wages etc) of $70k and had a loss of $10k, your net taxable income would be $60k and you pay tax on this amount, and will most likely receive a refund of overpaid tax from the wage.

On the GST front, I unfortunately don't have much experience on this type of business (I believe there are some concessions for some food shop owners for how they calculate their gst and non-gst sales) so though it does sound strange to me there could be a legitimate reason.... hopefully someone else may have more experience on that.

Sunnigirl

[Leelot]

I looked this up for you on the ATO website because I know for certain that some items do not attract GST. This link should help.

http://www.ato.gov.au/corporate/content.as...nt/mr200062.htm

I think if you get one of those booklets they mention in that article, it might help clarify the GST free items listed by the previous owners.

HTHs.


This post has been edited by Leelot: 28/10/2006, 11:06 PM

[remoteness]

Talk to your accountant. You are in business and as such should be aware of how these things work. It is too complicated for anyone on here to give you accurate information, based on your circumstances. Yes it may cost you a little bit, but worth it to get the correct answer. I don't think you can compare individual tax pack information with business questions.