business and professional items 2007

INDIVIDUALS

SEGMENT

BUSINESS AND PROFESSIONAL TAXPAYERSAUDIENCE

INSTRUCTIONS

FORMAT

NAT 2543–6.2007

PRODUCT ID

Business and professional items2007To help you prepare your schedule for individuals for 1 July 2006 – 30 June 2007

Lodge online.

e-tax – your online alternative for preparing and lodging your tax return. Go to www.ato.gov.au

Most refunds are issued within 14 days.

Lodge your tax return by 31 October 2007.

Use these instructions if directed to by TaxPack 2007 or TaxPack 2007 supplement.

OUR COMMITMENT TO YOUWe are committed to providing you with advice and information you can rely on.

We make every effort to ensure that our advice and information is correct. If you follow advice in this publication and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we must still apply the law correctly. If that means you owe us money, we must ask you to pay it. However, we will not charge you a penalty or interest if you acted reasonably and in good faith.

If you make an honest mistake when you try to follow our advice and you owe us money as a result, we will not charge you a penalty. However, we will ask you to pay the money, and we may also charge you interest.

If correcting the mistake means we owe you money, we will pay it to you. We will also pay you any interest you are entitled to.

You are protected under GST law if you have acted on any GST advice in this publication. If you have relied on GST advice in this publication and that advice later changes, you will not have to pay any extra GST for the period up to the date of the change. Similarly, you will not have to pay any penalty or interest.

If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser.

The information in this publication is current at May 2007. We regularly revise our publications to take account of any changes to the law, so make sure that you have the latest information. If you are unsure, you can check for a more recent version on our website at www.ato.gov.au or contact us.

HOW SELF-ASSESSMENT AFFECTS YOUSelf-assessment means the Tax Office uses the information you give on your tax return and any related schedules and forms to work out your refund or tax liability. We do not take any responsibility for checking the accuracy of the details you provide, although our system automatically checks the arithmetic.

Although we do not check the accuracy of your tax return at the time of processing, at a later date we may examine the details more thoroughly by reviewing specific parts, or by conducting an audit of your tax affairs. We also have a number of audit programs that are designed to continually check for missing, inaccurate or incomplete information.

What are your responsibilities?It is your responsibility to lodge a tax return that is signed, complete and correct. Even if someone else – including a tax agent – helps you to prepare your tax return and any related schedules, you are still legally responsible for the accuracy of your information.

What if you lodge an incorrect tax return?If you become aware that your tax return is incorrect, you must contact us straight away.

Initiatives to complement self-assessmentThere are a number of systems and entitlements that complement self-assessment, including:n the private ruling system (see below) n the amendment system (if you find you have left

something out of your tax return)nyour entitlement to interest on early payment or

over-payment of a tax debt.

Do you need to ask for a private ruling?If you are uncertain about how a tax law applies to your personal tax affairs, you can ask for a private ruling. To do this, complete a Private ruling application form (non-tax professionals) (NAT 13742–01.2007), or contact us.

Lodge your tax return by the due date, even if you are waiting for the response to your application. You may need to request an amendment to your tax return once you have received the private ruling.

We publish all private rulings on our website. (Before we publish we edit the text to remove information that would identify you.)

© COMMONWEALTH OF AUSTRALIA 2007

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth available from the Attorney-General’s Department. Requests and enquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney-General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at http://www.ag.gov.au/cca

PUBLISHED BY

Australian Taxation Office Canberra May 2007

JS 6802

This publication is available free from the Tax Office. We prohibit any party from selling it.

CONTENTS

P11Trade debtors 50

P12Trade creditors 50

P13Total salary and wage expenses 50

P14Payments to associated persons 51

P15 Intangible depreciating assets first deducted 51

P16Other depreciating assets first deducted 52

P17Termination value of intangible depreciating assets 52

P18Termination value of other depreciating assets 53

P19Trading stock election 53

AttAchments

Business and professional items schedule for individuals 2007

Individual PAYG payment summary schedule 2007

mORe InFORmAtIOn insidebackcover

IntROductIOn 1

cOmPletIng the schedule 3

s1 Simplified tax system (STS) elections 3

P1 Personal services income (PSI) 5

P2 Description of main business or professional activity 10

P3 Number of business activities 10

P4 Status of business 11

P5 Business name of main business and Australian business number (ABN) 11

P6 Business address of main business 11

P7 Did you sell any goods or services using the internet? 11

P8 Business income and expenses 11

Income 12

Expenses 17

Reconciliationitems 31

P9 Business loss activity details 45

P10STS depreciating assets 49

ABOut these InstRuctIOnsBusiness and professional items 2007willhelpyoufillintheBusiness and professional items schedule for individuals 2007,foundatthebackofthispublication.

Intheseinstructions,weprovideinformationabout:n thesimplifiedtaxsystem(STS)n personalservicesincome(PSI)n thetypesofbusinessincomeyoumustshow

ontheschedule,andn thetypeofdeductionsyoumaybeabletoclaim.

Who should use these instructions?Usetheseinstructionsifyouareanindividualwhocompleteditems13,14or15onyourtaxreturn(supplementarysection).Youmayalsoneedtousetheseinstructionsifyouhaveanetlossfromabusinessactivitycarriedoninpartnershipwithothers.

Publications and servicesTofindouthowtogetapublicationreferredtointheseinstructionsandforinformationaboutourotherservices,seetheinsidebackcover.

BUSINESSANDPROFESSIONALITEMS 2007 www.ato.gov.au 1

INTRODUCTION

WhO thIs schedule Is FORIfyoucompleteitems13,14or15ofyourtaxreturn(supplementarysection),youmustfillintheBusiness and professional items schedule for individuals 2007atthebackofthispublicationandsenditinwithyourtaxreturn.Theseinstructionswillhelpyoutofillintheschedule.Ifthebusinessorprofessionalitemsthatapplytoyouarenotfilledin,yourtaxreturnwillbesentbacktoyou.Weconsiderthatyourtaxreturnhasnotbeenlodgeduntilitisreturnedtouscomplete.

Ifyourtaxreturnandcompletedschedulearelodgedlate,youmaybeliableforapenalty.Forinformationonthepenaltyforfailingtolodgeontime,seepage11inTaxPack 2007.

Ifyouhaveanetlossfromabusinessactivitycarriedoninpartnershipwithothers,youmayneedtocompleteitemsP3andP9oftheschedule.Seequestion12inTaxPack 2007 supplement.Donotincludeyourpartnershipdetailsatanyotheritemonyourschedule.

YouwillalsoneedtocompletetheIndividual PAYG payment summary schedule 2007atthebackofthispublicationifyoureceivedanyofthefollowing:n Payment summary – voluntary agreementn Payment summary – withholding where ABN not quotedn Payment summary – labour hire and other

specified paymentsn Payment summary – foreign resident withholding.

Theseinstructionswillhelpyoufillinthatschedulealso.

WhAt’s neW

Primary production and non-primary production deferred non-commercial business losses.

Thetotalamountofdeferrednon-commercialbusinesslosseshasbeendividedintotwoseparatetotalsforprimaryproductiondeferrednon-commercialbusinesslossesandnon-primaryproductiondeferrednon-commercialbusinesslosses.ReadP9 Business loss activity detailsonpage45formoreinformation.

Project Pool deduction Rate

Thepercentageinthecalculationofthedeductionrateforprojectsthatstartedtooperateonorafter10May2006andcontainonlyprojectamountsincurredonorafter10May2006changedfrom150%to200%.

hOW mAnY hOuRs dId It tAKe YOu tO PRePARe And cOmPlete thIs schedule?TheTaxOfficeiscommittedtoreducingthecostsinvolvedincomplyingwithyourtaxobligations.Yourresponsetothisitemwillhelpusmonitorthesecostsascloselyaspossible.

WritethenumberofhoursittookyoutoprepareandcompleteyourBusiness and professional items schedule for individuals 2007at s intheTaxpayer’s signatureblockonyourschedule.

Whencompletingthisitemconsiderthetime,roundeduptothenearesthour,youspent:n readingtheinstructionsn collectingthenecessaryinformationtocomplete

thisschedulen makinganynecessarycalculationsn completingtheschedule,andn puttingthetaxaffairsofyourbusinessinordersothe

informationcanbehandedtoyourtaxagent.

Youranswershouldreflectthetimeyourbusinessspentpreparingandcompletingyourscheduleandthetimespentbyyourtaxagentandanyotherpersonwhoseassistanceyouobtained.

Ifyouareataxagentpreparingthisscheduleonbehalfofyourclient,includeyourtimeandareliableestimateoftheirtime.

2 www.ato.gov.au BUSINESSANDPROFESSIONALITEMS 2007

RecORds YOu need tO KeePYoumustkeeprecordsofmosttransactionsinEnglishforfiveyearsafteryoupreparedorobtainedthem,orfiveyearsafteryoucompletedthetransactionsoractstowhichtheyrelate,whicheveristhelater.Taxation Ruling TR 96/7 – Income tax: record keeping – section 262A – general principlesclarifiestherecordkeepingobligationsofsmallbusinesses,particularlyforcashtransactions.Ifyouhavelosses,youshouldgenerallykeeprecordsforfouryearsfromtheyearofincomewhenataxlossisfullydeductedoranetcapitallossisfullyapplied.

TheTaxOfficeishelpingsmallbusinessoperatorsmeettheirrecordkeepingobligationsbyreviewingtheirrecordkeepingpractices.Thesereviewsstartwithaphonecallorabriefvisittothebusinesspremises.Theprocessisexplained,youcanaskquestionsandaninterviewisarrangedforalaterdate.

SomeofthemoresignificantrecordkeepingproblemsidentifiedbytheTaxOfficearefailureto:n recordcashincomeandexpendituren accountforpersonaldrawingsn recordgoodsforyourownusen separateprivateexpensesfrombusinessexpensesn keepvalidtaxinvoicesforcreditableacquisitions

whenregisteredforGSTn keepadequatestockrecords,andn keepadequaterecordstosubstantiatemotor

vehicleclaims.

Foradditionalinformation,seeRecord keeping for small business(NAT3029).TofindouthowtogetthispublicationortogetaCD-ROMofourelectronicrecordkeepingpackagee-Record,seetheinsidebackcover.

choice of superannuation fund

Youmustkeeprecordsthatshowyouhavemetyourchoiceofsuperannuationfundobligations.Forfurtherinformationabouttherecordsyouneedtokeep,pleasevisitourwebsitewww.superchoice.gov.auorphoneourSuperChoiceInfoline(seetheinsidebackcover).

hOBBY OR BusIness?Itisimportanttodeterminewhetheryouarecarryingonabusinessorpursuingahobby,sportorrecreationalactivitythatdoesnotproduceincome.

Ingeneral,youareconsideredtocarryonabusinessiftheactivity:n hascommencedn hasasignificantcommercialpurposeorcharactern hasapurposeofprofitaswellasaprospectofprofitn iscarriedoutinamannerthatischaracteristicof

theindustryn isrepeated,regularorcontinuous,andn cannotbemoreaccuratelydescribedasahobby,

recreationorsportingactivity.

Foradditionalinformation,seeAre you carrying on a business?inthepublicationTax basics for small business(NAT1908).PrimaryproducersshouldalsoseeTaxation Ruling TR 97/11 – Income tax: am I carrying on a business of primary production?

NOTEWhenyouhavecompletedyourBusiness and professional items schedule for individuals 2007,youwillneedtotransfer:n yourNet PSIamount(ifany)from A itemP1onyour

scheduleto A item13onpage9ofyourtaxreturn(supplementarysection)

n yourNET INCOME OR LOSS FROM BUSINESSamountsfrom Y and Z itemP8onyourscheduleto B andc (respectively)item14onpage10ofyourtaxreturn(supplementarysection).


S1SIMPLIFIEDTAXSYSTEM(STS)ELECTIONSAre you n eligible to enter or continue in the STS

and want to do so, or n exiting the STS?

NO GotoP1 Personal services income (PSI)onpage5.

YES Readon.

You need to knowTheSTSprovidesanalternativemethodofdeterminingtaxableincomeforeligiblesmallbusinesses.TheSTShastwokeyelements:n simplifiedcapitalallowances(depreciation)rules,andn simplifiedtradingstockrules.

Inaddition,theSTS12-monthruleallowsanimmediatedeductionforprepaidexpenseswherethepaymentisincurredforaperiodofservicenotexceeding12monthsANDtheperiodofserviceendsinthenextincomeyear.

EntryintotheSTSisoptionalifyousatisfytheeligibilitytests.

NOTEWhentheSTSbeganon1July2001anSTStaxpayerwasrequiredtoaccountformostbusinessincomewhenitwasreceived,andmostbusinessexpenseswhentheywerepaid.ThisisreferredtoastheSTSaccountingmethod.Fromthefirstincomeyearstartingonorafter1July2005,youarenolongerrequiredtousetheSTSaccountingmethod.Youarenowabletocalculateyourtaxableincomeusingthemostappropriatemethodforyourcircumstances.However,ifyouwereanSTStaxpayerinanincomeyearthatstartedbefore1July2005,thenwhileyoucontinuetobeanSTStaxpayer(fromthefirstincomeyearthatstartsonorafter1July2005),youcanchoosetocontinueusingtheSTSaccountingmethod.IfyouchoosenottocontinueusingtheSTSaccountingmethod,youwillbeabletocalculateyourtaxableincomeusingeither:n theaccruals(earnings)method,thatis,ordinary

incomeisrecognisedwhenitisderivedandgeneraldeductionsarerecognisedwhentheyareincurred,or

n thecash(receipts)method,thatis,ordinaryincomeisrecognisedwhenitisreceivedandgeneraldeductionsarerecognisedwhentheyarepaidor,alternatively,whentheyareincurred.

WhereyouchoosenottocontinueusingtheSTSaccountingmethod,businessincomeandexpensesthathavenotbeenaccountedfor(becausetheyhavenotbeenreceivedorpaid)willbeaccountedforintheyearyouchangetotheaccrualsorcashmethod.

IfyouchoosetoentertheSTS,youmustapplyboththesimplifiedcapitalallowances(depreciation)rulesandthesimplifiedtradingstockrules,iftheyapplytoyou.AsanSTStaxpayer,ifyouhavenon-businessincome,suchassalaryandwages,youcanalsoclaimadeductionfordepreciatingassetsusedinearningyouremploymentincomeunderSTSdepreciationrules.Thesimplifiedcapitalallowancesrulesapplytoyournon-businessincomeanddeductionsaswellastoyourbusinessincomeanddeductions.However,theSTScapitalallowancesrulesdonotapplytodepreciatingassetsusedinrentalproperties.

IfyouchoosetoleavetheSTS,youcannotre-entertheSTSuntilatleastfiveyearsaftertheincomeyearforwhichyouwerelastanSTStaxpayer.IfyoumustleavetheSTSbecauseyouarenolongereligible,youcanbecomeanSTStaxpayeragainforanincomeyearassoonasyouareeligible.

Seethenoteonpage5regardingtransitionalarrangementsaboutre-enteringtheSTS.

FormoreinformationabouttheSTS:n seeThe simplified tax system – a guide for tax

agents and small businesses(NAT6459)n visitourwebsite,orn phonetheBusinessInfoline(seetheinsidebackcover).

IfyouwanttoentertheSTSandareeligibletodoso,youmustcompleteg ,h and I itemS1.IfyouwanttocontinueintheSTSandareeligibletodoso,youmustcompleteg , R and I itemS1.

IfyouareexitingtheSTS,youmustcomplete s or t itemS1.GotoExiting the STSonpage5.

IfyouarenoteligibletoentertheSTSorareeligiblebutdonotwanttoentertheSTSgotoitemP1onpage5.

NOTEIfyouareapartnerinapartnershipandthepartnershipiseligibleandwantstoentertheSTS,theelectiontoentermustbemadeatitem3onthepartnership’staxreturn.YoudonotcompleteitemS1.

IfyoucarryonabusinessseparatetothepartnershipandyouareeligibletoentertheSTS,youcanalsochoosetoentertheSTSbycompletingitemS1.

elIgIBIlItYTobeeligibletobeanSTStaxpayerforanincomeyear,ataxpayermustsatisfythreetests.Theymust:n carryonabusinessinthatyearn haveanSTSaverageturnoverforthatyearoflessthan

$1million(includingtheturnoverofanyentitiesthattheyare‘groupedwith’),and

n togetherwithanygroupedentities,holddepreciatingassetswithatotaladjustablevalueattheendoftheyearoflessthan$3million.

cOmPletIng the schedule

s1


PROPOSEDCHANGESTOTHESTS

Inthe2006FederalBudgetthegovernmentannouncedchangestotheSTS,whichwillapplyfromthestartofthe2007–08incomeyear.

TheseproposedchangeswillincreasetheSTSaverageturnoverthresholdto$2millionandremovethe$3milliondepreciatingassetstestfromtheSTSeligibilityrequirements.

grouping rulesSpecialrulescalledtheSTSgroupingruleswilldeterminewhothetaxpayerisgroupedwith.TheserulespreventlargerbusinessesfromstructuringorrestructuringtheiraffairstotakeadvantageoftheSTS.Formoreinformationonthegroupingrules,seeTaxation Ruling TR 2002/6 – Income tax: simplified tax system: eligibility – grouping rules (STS affiliate, control of non fixed trusts)orphonetheBusinessInfolineon13 28 66.

test 1: Were you carrying on a business during the year?

Ifyoucarriedonabusinessatanytimeduringtheyear,yousatisfythistest.GotoTest 2.

test 2: Is your STS average turnover less than $1 million?

YouworkoutyourSTSaverageturnoverforanincomeyeareitherbylookingbacktoactualturnoverinpreviousyearsorbylookingforwardtoestimatedfutureturnover.

BeforeyoucanworkoutyourSTSaverageturnoveryouneedtoknowyourSTSgroupturnover.

YourSTSgroupturnoveristhevalueofbusinesssuppliesyoumakeintheordinarycourseofyourbusinessandthevalueofbusinesssuppliesanybusinessesyouaregroupedwithmakeintheordinarycourseoftheirbusiness.Itdoesnotincludeanybusinesssuppliesmadebetweenyouandbusinessesyouaregroupedwith.

Formoreinformation,phonetheBusinessInfolineorseeTaxation Ruling TR 2002/11 – Income tax: Simplified Tax System eligibility – STS average turnover.

look back methodUnderthelookbackmethod,youcalculateyourSTSaverageturnoverusingtheaverageofyourSTSgroupturnoversofanythreeyearsoutofthepreviousfourincomeyears(excludingthecurrentyear).

Ifyouhavebeeninbusinessforfewerthanthreeyears,youwillneedtocalculateyourSTSaverageturnoverforthenumberofyearsyouhavebeeninbusiness(excludingthecurrentyear).

Ifyourbusinesshasoperatedforonlypartofanyofthoseyears,youmustuseareasonableestimateofwhatyourturnoverwouldhavebeenifyouwereinbusinessforthefullyear.

Useworksheet1toassistyouwithyourcalculation.

WORKsheet 1

Income year STS group turnover

2002–03 $

2003–04 $

2004–05 $

2005–06 $

Crossoutthelargestturnoveramountifyouhavebeeninbusinessforeachofthefourincomeyears.

Totalofthethree*years $

(divideby3*)

STSaverageturnover $

*orthenumberofyearsyouhavebeeninbusinessiflessthanthreeyears

IfyourSTSaverageturnoverislessthan$1millionyousatisfythistest.GotoTest 3.Otherwisereadon.

look forward methodUnderthelookforwardmethodyoucalculateyourSTSaverageturnoverusingareasonableestimateofSTSgroupturnoversforthecurrentyearandthefollowingtwoyears(ignoringanyofthoseyearsforwhichyoudonotexpecttobecarryingonabusinessatanytimeinthatyear).

Alternatively,youcanuseyouractualSTSgroupturnoverforthecurrentyearandareasonableestimateofyourSTSgroupturnoverforeachofthefollowingtwoincomeyears(ignoringanyofthoseyearsforwhichyoudonotexpecttobecarryingonabusinessatanytimeinthatyear).

Ifyourbusiness(oragroupedentity)hasoperatedforonlypartofthecurrentyear,youmustuseareasonableestimateofwhatyourSTSgroupturnoverforthisyearwouldhavebeenifyou(orthegroupedentity)hadcarriedonabusinessthroughoutthisyear.

Useworksheet2toassistyouwithyourcalculation.

WORKsheet 2

Income year STS group turnover

2006–07 $

2007–08 $

2008–09 $

Totalofthethree*years $

(divideby3*)

STSaverageturnover $

*orthenumberofyearsyouexpecttobeinbusinessiflessthanthreeyears(seeabove)

IfyourSTSaverageturnoverislessthan$1millionyousatisfythistest.GotoTest 3.

s1


test 3: Did you and any businesses you were grouped with have depreciating assets with a total adjustable value of less than $3 million at 30 June 2007?

ThistestonlyincludesdepreciatingassetsforwhichadeductionhasbeenallowedorisallowableundertheSTSoruniformcapitalallowances(UCA)rules.

Broadly,theadjustablevalueofadepreciatingassetisitscostlessitsdeclineinvaluesinceitwasfirstused,orinstalledreadyforuseforanypurposewhetherbusinessorprivate.Itisthevalueattheendoftheincomeyearthatisrelevant.

Ifthetotaladjustablevalueofyourdepreciatingassetsandthoseofentitiesyouaregroupedwithforthe2006–07incomeyearwaslessthan$3millionatthistime,yousatisfythistest.

Did you satisfy all three eligibility tests?

NO YouarenoteligibletoenterorcontinueintheSTS.IfyouwerenotintheSTSin2005–06,gotoitemP1 Personal services incomeinthenextcolumn.IfyouwereintheSTSin2005–06andarenolongereligible,youmustexittheSTS.Readon.

YES Readon.

Completing this item

Entering the STSIfyouwanttoentertheSTSandareeligibletodoso,completeg ,h and I itemS1.

PrintXintheYESboxesatg andh itemS1.

PrintXintheYESboxat I itemS1ifyouaregroupedwithanotherentityforanyyearrelevanttoyourcalculationofSTSaverageturnover;otherwiseprintXintheNObox.

Continuing in the STSIfyouwanttocontinueintheSTSandareeligibletodoso,completeg , R and I itemS1.

PrintXintheYESboxesatg and R itemS1.

PrintXintheYESboxat I itemS1ifyouaregroupedwithanotherentityforanyyearrelevanttoyourcalculationofSTSaverageturnover;otherwiseprintXintheNObox.

Exiting the STSIfyousatisfyallthreeeligibilitytestsbutwanttoexittheSTS,complete s itemS1.

PrintXintheYESboxat s itemS1.Leaveallotherboxesblank.

IfyoudonotsatisfyallthreeeligibilitytestsyoumustexittheSTSbycompleting t itemS1.

PrintXintheYESboxat t itemS1.Leaveallotherboxesblank.

Generally,ifyouchoosetoleavetheSTS,youcannotre-entertheSTSuntilatleastfiveyearsaftertheincomeyearforwhichyouwerelastanSTStaxpayer.Seethenotebelowfortheexception.

However,ifyoumustleavetheSTSbecauseyouarenolongereligible,youcanbecomeanSTStaxpayeragainforanincomeyearassoonasyouareeligible.

NOTETherearetransitionalarrangementswhichprovidethatifyoupreviouslychosetoexittheSTSforanincomeyearbeginningbefore1July2005,youwillbeabletore-entertheSTSduringtheperiodoffiveyearsstartingon1July2005(ifyouareeligible)withouthavingtowaitfiveyears.

P1PERSONALSERVICESINCOME(PSI)

stOPYoudonothavetocompleteitemP1ifyourPSIisgainedasanemployee.ItemP1concernssoletradersonly.

YoualsodonothavetocompleteitemP1ifyourPSIwasreceivedthroughacompany,partnershiportrust.

Did you receive personal services income?

NO PrintXintheNOboxat itemP1onyourschedule.GotoP2 Description of main business or professional activityonpage10.

YES PrintXintheYESboxat itemP1onyourschedule.Readon.

You need to knowPSIisincomethatismainlyarewardforanindividual’spersonaleffortsorskills.

ExamplesofPSIare:n incomeofaprofessionalpractitionerinasolepracticen incomepayableunderacontractwhichiswhollyor

principallyforthelabourorservicesofapersonn incomederivedbyaprofessionalsportspersonor

entertainerfromtheexerciseofprofessionalskillsn incomederivedbyconsultantsfromtheexerciseof

personalexpertise.

PSIdoesnotincludeincomethatismainly:n forsupplyingorsellinggoods(forexample,from

retailing,wholesalingormanufacturing)n generatedbyasignificantincome-producingasset

(suchasabulldozer)n forgrantingarighttouseproperty(forexample,the

copyrighttoacomputerprogram),orn generatedbyabusinessstructure(forexample,alarge

accountingfirm).

P1


IfyouhaveearnedPSIbutnotasanemployee,youmaynotbeabletoclaimcertaindeductionsinrelationtoearningthatincome–forexample,rent,mortgageinterest,ratesorlandtaxforyourhome,orpaymentstoyourspouse(orotherassociate)forsupportworksuchassecretarialduties.Thisdependsonwhether:n youhaveapersonalservicesbusinessdetermination

fromtheCommissionerstatingthatyourPSIwasfromconductingapersonalservicesbusinessforthewholeoftheperiodyouearnedPSI,or

n yousatisfiedoneofthefourtestsinpartAbelow.

IfyouearnedPSIasasoletrader,youneedtoreadonandansweroneormoreofthequestionsinpartAtodeterminewhetherdeductionsinrelationtoyourPSIareaffectedbythePSIrules.

ThePSIrulesdonotaffectyourlegal,contractualorworkplacearrangements–youwon’tbetreatedasanemployeeasaresultoftherules.

PARt A

Did you satisfy the results test?IfyouearnPSI,yousatisfytheresultstestintheincomeyearif,inrespectofatleast75%ofthisincome,youcananswerYEStoallofthefollowingthreequestionsinrelationtoyourwork:n Underyourcontractorarrangement,wasthePSIpaid

toachieveaspecifiedresultoroutcome?n Didyouhavetoprovidethetoolsorequipment

necessary(ifany)todoyourwork?(Ifnotoolsorequipmentwererequired,answerYES.)

n Wereyouliableforrectifyingdefectsinyourwork?

Weconsiderthatyouarepaidtoachievearesultunderyourcontractwhenyourcontractrequirestheproductionofaspecifiedresultoroutcomeandpaymentisconditionaluponthatoutcomebeingachieved.Theessenceofthecontractistoachievearesultandnotjustdoworkasrequired.

NO PrintXintheNOboxat P itemP1onyourschedule.Readon.

YES PrintXintheYESboxat P itemP1onyourschedule.GotoP2 Description of main business or professional activityonpage10.

Have you received a personal services business determination from the Commissioner that was in force for the whole of the period you earned PSI?ThisisanoticefromtheCommissionerstatingthatyouareconductingapersonalservicesbusiness.IfyouhaveapersonalservicesbusinessdeterminationfromtheCommissioner,thePSIrulesdonotapplytoyourPSIanddeductions.

NO PrintXintheNOboxatc itemP1onyourschedule.Readon.

YES PrintXintheYESboxatc itemP1onyourschedule.GotoP2 Description of main business or professional activityonpage10.

Did you receive 80% or more of your PSI from one source?Ifyoudon’tsatisfytheresultstestand80%ormoreofyourPSIintheincomeyearcamefromoneclientanditsassociates,youcannotself-assesswhetheryousatisfytheotherpersonalservicesbusinesstests.ThePSIrulesapplytoyouunlessyougetadeterminationfromtheCommissioner.

Ifyoudon’tsatisfytheresultstest,youcanself-assessagainsttheothertestsonlyiflessthan80%ofyourPSIcamefromeachclient.

YoushouldconsiderPSIobtainedbymerelyputtingyournamewithalabourhirefirm,placementagencyorsimilarorganisation,asincomefromoneclient.

COMMISSIONAGENTSSpecialrulesapplytocommissionagents.Formoreinformation,phonetheBusinessInfoline(seetheinsidebackcover).

NO PrintXintheNOboxatQ itemP1onyourschedule.Readon.

YES PrintXintheYESboxatQ itemP1onyourschedule.GotopartBonpage7.

Did you satisfy the unrelated clients test?YouwillsatisfytheunrelatedclientstestintheincomeyearifyoucananswerYEStothefollowingquestion:n DidyoureceivePSIfromtwoormoreclientswhoare

notassociatedwitheachotherorwithyou?

Youmustalsoprovidethepersonalservicesworkasadirectresultofmakingofferstothepublic(forexample,byadvertisingorwordofmouth).Donotcountclientsobtainedbymerelyregisteringwithalabourhirefirm,placementagencyorsimilarorganisation.

COMMISSIONAGENTSSpecialrulesapplytocommissionagents.Formoreinformation,phonetheBusinessInfoline(seetheinsidebackcover).

NO Readon.

YES PrintXintheboxatd1itemP1onyourschedule.Readon.

P1


Did you satisfy the employment test?YousatisfytheemploymenttestintheincomeyearifyoucananswerYEStoeitherofthefollowingquestions:n Didyouhaveoneormoreapprenticesforatleasthalfthe

incomeyear?n Didyouhaveemployeesordidyouengage

subcontractorsorentitieswhoperformedatleast20%(bymarketvalue)oftheprincipalwork?

PrincipalworkisthemainworkthatgeneratesthePSIanddoesnotusuallyincludesupportworksuchassecretarialduties.Youcancountaspouseorfamilymemberwhodoesprincipalworkbutnotcompanies,partnershipsortrustsassociatedwithyou.

NO Readon.

YES PrintXintheboxate1itemP1onyourschedule.Readon.

Did you satisfy the business premises test?YousatisfythebusinesspremisestestifyoucananswerYEStoallofthefollowingquestions:

ForthewholeperiodduringwhichyouearnedPSI,wereyourbusinesspremises:n ownedorleasedbyyoun mainlyusedbyyouforworkearningyourPSI(for

example,morethan50%oftheuse)n usedexclusivelybyyoun physicallyseparatefromyourprivateresidenceor

theprivateresidenceofanyofyourassociates,andn physicallyseparatefromthebusinessaddressof

yourclientsortheirassociates?

NO Readon.

YES PrintX intheboxatF1 itemP1onyourschedule.Readon.

IfyouprintedXatd1,e1orF1 ,gotoitemP2onpage10.Otherwisereadon.

PARt B

stOPDonotshowinpartBPSIamountsthatweresubjecttoforeignresidentwithholding.ShowtheseatitemP8.

You need to know

YoumustcompletepartBofitemP1ifyoureceivedPSIandyoudidnot:n receiveapersonalservicesbusinessdeterminationin

relationtoyourPSIn satisfytheresultstest,orn satisfyatleastoneoftheotherthreepersonalservices

businesstests(iflessthan80%ofyourPSIcamefromeachclient).

PSIisdividedinto:n incomethatwassubjecttoaPAYGvoluntaryagreement

towithholdtaxn incomefromwhichtaxhasbeenwithheldbecauseyou

didnotquoteyourAustralianbusinessnumber(ABN)tooneofyourpayers

n incomereceivedunderalabourhirearrangementorfromaspecifiedpayment

n otherPSI.

goods and services taxIfyouareregisteredorrequiredtoberegisteredforgoodsandservicestax(GST),donotincludeanyGSTamountsinyourassessableincome.Yourdeductionsshouldnotincludeanyamountsthatrelatetoinputtaxcreditentitlements.

STSTAXPAYERSIfyouhavechosentoenterorcontinueintheSTSatitemS1,youmustcompletetheincomeanddeductionpartsofitemP1usingtheSTSrules.Forinformationabouttheserules,readSTS taxpayersonpage13.IfyouareclaimingSTSdepreciation,youalsoneedtocompleteitemP10onyourschedule.

YOu mAY need tO cOmPlete An IndIvIduAl PAYg PAYment summARY scheduleIftaxhasbeenwithheldfrombusinessincomeyoushouldhavereceivedapaymentsummary.

YouwillneedtocompletetheIndividual PAYG payment summary schedule 2007beforecompletingtherestofitemP1ifyoureceivedanyofthefollowingpaymentsummaries:n Payment summary – voluntary agreementn Payment summary – withholding where ABN not quotedn Payment summary – labour hire and other specified

payments.

(TherearetwoblankcopiesoftheIndividual PAYG payment summary schedule 2007atthebackofthispublication.)

Apayermayissueareceipt,remittanceadviceorsimilardocumentinplaceofthePayment summary – withholding where ABN not quoted.Thisdocumentmustcontainthesamedetailsasthepaymentsummaryandbesignedbythepayer.

Ifyoureceivedincomefromwhichtaxwaswithheldandyoudidnotreceiveorhavelostyourpaymentsummary,contactyourpayerandaskforacopy.

P1


how to complete the Individual PAYG payment summary schedule 2007

steP 1Writeyourtaxfilenumber(TFN)andnameintheappropriateboxesatthetopoftheschedule.

steP 2Nature of income–PrintXinthePersonal services incomebox.

steP 3Foreachpaymentsummary,transferthefollowinginformationtotheschedule:n thetypeofwithholding–lookatyourpaymentsummary

carefullytodetermineitstypeandcompletetheTYPEbox,usingthefollowingkey:V voluntaryagreementN withholdingwhereABNnotquotedS labourhireorotherspecifiedpayments

n thepayer’sABNorwithholdingpayernumber(WPN)andthepayer’snameintheappropriateboxes

n thetotaltaxwithheldintheTax withheldboxn thegrosspaymentintheGross paymentbox.

steP 4Checkthatyouhaverecordeddetailsfromallrelevantpaymentsummariesonyourpaymentsummaryschedulethenattachthescheduletopage3ofyourtaxreturn.

Donotattachthepaymentsummariestoyourtaxreturn.Youmustkeepthemforaperiodoffiveyears.

PayersmustreporttotheTaxOfficedetailsofpaymentswhereamountsoftaxhavebeenwithheld.Thisinformationwillbecross-checkedwiththatonyourtaxreturntoensurethatyouhavedeclaredthecorrectamountofincomeandthecorrectamountoftaxwithheld.

YOUMAYNEEDTWOPAYMENTSUMMARYSCHEDULESIfyouhavebothPSI(itemP1)andbusinessincome(itemP8),youwillneedtocompleteanindividualPAYGpaymentsummaryscheduleforeachtypeofincome.

IncOmePsI – vOluntARY AgReement

Did you receive any PSI that was subject to a PAYG voluntary agreement?

NO GotoPSI – where Australian business number not quoted inthenextcolumn.

YES Readon.

Theamountyoushowatm isthetotalincomeyoureceivedthatwassubjecttoaPAYGvoluntaryagreement,includingamountsoftaxwithheld.Youwillbeabletocalculatethisamountfromyourcompletedpaymentsummaryschedule.

Completing this itemAddupalltheGross paymentamountsonyourcompletedpaymentsummaryschedulethathaveaVinthecorrespondingTYPEbox.Writethetotalatm itemP1.Donotshowcents.

Ifyoucompletem itemP1youmustalsocompleteg item13onpage9ofyourtaxreturn(supplementarysection).

PsI – WheRe AustRAlIAn BusIness numBeR nOt QuOted

Did you have any amounts of tax withheld from your PSI for failure to quote an Australian business number (ABN)?

NO GotoPSI – labour hire or other specified payments below.

YES Readon.

Theamountyoushowatn isyourtotalPSIfromwhichanamounthasbeenwithheldbecauseyoudidnotquoteyourABN,includingtheamountsoftaxwithheld.Youwillbeabletocalculatethisamountfromyourcompletedpaymentsummaryschedule.

Completing this itemAddupalltheGross paymentamountsonyourcompletedpaymentsummaryschedulethathaveanNinthecorrespondingTYPEbox.Writethetotalatn itemP1.Donotshowcents.

Ifyoucompleten itemP1youmustalsocompleteh item13onpage9ofyourtaxreturn(supplementarysection).

PsI – lABOuR hIRe OR OtheR sPecIFIed PAYments

Did you receive any PSI under a labour hire arrangement or from a specified payment?

Specifiedpaymentsinclude:n incomefromtutorialservicesprovidedfortheIndigenous

TutorialAssistanceSchemeoftheDepartmentofEducation,ScienceandTraining

n incomefromtranslationandinterpretationservicesfortheTranslatingandInterpretingServiceoftheDepartmentofImmigrationandCitizenship

n incomeasaperformingartistinapromotionalactivity.

NO Goto PSI – other onthenextpage.

YES Readon.

stOPDonotincludeincomereceivedasanemployeeofalabourhirebusiness.TheseamountswillappearonyourPAYG withholding payment summary – individual non-businessandshouldbeshownatitem1onpage2ofyourtaxreturn.

P1


TheamountyoushowatO isthetotalincomeyoureceivedfromlabourhireorotherspecifiedpayments,includingamountsoftaxwithheld.Youwillbeabletocalculatethisamountfromyourcompletedpaymentsummaryschedule.

Completing this itemAddupalltheGross paymentamountsonyourcompletedpaymentsummaryschedulethathaveanSinthecorrespondingTYPEbox.WritethetotalatO itemP1.Donotshowcents.

IfyoucompleteO itemP1youmustalsocomplete J item13onpage9ofyourtaxreturn(supplementarysection).

PsI – OtheR

Did you receive any other PSI?

NO GotoDeductions below.

YES Readon.

WorkoutthetotalamountofotherPSIandwritethisamountat J itemP1.

NOTEIfyouareregisteredorrequiredtoberegisteredforGST,donotincludeanyGSTamountsinyourassessableincome.

deductIOns

limited deductions against PsIThePSIrulesaffectthedeductionsyoucanclaimagainstyourPSI.Theydonotaffectyourlegal,contractualorworkplacearrangements–youwon’tbetreatedasanemployeeasaresultofthePSIrules.

Theinformationonthispageisaguideonly.Youmayneedfurtherinformationtodeterminewhetheradeductionisavailableinyourcircumstances.Taxation Ruling TR 2003/10 – Income tax: deductions that relate to personal services incomeexplainsthePSIdeductionlimitationrules.Thisrulingisavailableonourwebsiteortofindouthowtogetaprintedcopy,seetheinsidebackcover.

What deductions you may be able to claimSubjecttospecificexceptions,thegeneralruleisthatyoumayclaimanamountthatisincurredingainingorproducingyourPSIifyoucouldclaimthatamountiftheincomewaspayabletoyouasanemployee.

Thefollowingareexamplesofitemsyoumaybeabletoclaimadeductionfor:n premiumsforworkers’compensation,publicliability

andprofessionalindemnityinsurancen bankandotheraccount-keepingfeesandchargesn tax-relatedexpenses,suchasthecostofpreparingand

lodgingataxreturnorbusinessactivitystatement(BAS)n registrationorlicensingfeesn expensesforadvertising,tenderingandquotingforwork

n deductionfordeclineinvalueofdepreciatingassetsn STSdepreciationn runningexpensesforyourhomeofficesuchasheatingand

lightingforusingaroominyourhouseasahomeoffice(notincludingrent,mortgageinterest,ratesorlandtaxes)

n salaryandwagesforanarm’slengthemployee(notanassociate)

n contributionstoacomplyingsuperannuationfundonbehalfofanarm’slengthemployee(notanassociate)uptotheage-baseddeductionlimit

n reasonableamountspaidtoanassociateforprincipalwork

n contributionstoacomplyingsuperannuationfundorretirementsavingsaccountuptothesuperannuationguaranteeamountforanassociatedoingsolelyprincipalwork.

Donotincludeanyamountthatwasasuperannuationcontributionforyourself.AnydeductionforyourownsuperannuationcontributionsmustbeclaimedatitemD13onyourtaxreturn.SeequestionD13inTaxPack 2007 supplement.

What you cannot claimYoucannotclaimanamountforthefollowingifitrelatedtogainingyourPSI:n rent,mortgageinterest,ratesorlandtaxforyour

residence(ortheresidenceofanassociate)n amountspaidtoanassociatefornon-principalworkn contributionstoasuperannuationfundforanassociate

doingsolelynon-principalwork.

deductIOns FOR PAYments tO AssOcIAtes FOR PRIncIPAl WORK

Do you have deductions for payments to associates for principal work?

NO GotoTotal amount of other deductions against PSI below.

YES Readon.

Addupthetotalamountofpaymentsmadetoassociatesforprincipalwork.Writethetotalat K itemP1.

tOtAl AmOunt OF OtheR deductIOns AgAInst PsI

Do you have other allowable deductions against your PSI?

NO GotoNet PSI onthenextpage.

YES Readon.

P1


You need to knowIncompletingthisquestionyouonlyincludenon-commercialbusinesslossesdeferredfromaprioryeariftheyrelatetoanactivitywhichisthesameas,orsimilarto,yourcurrentyearactivity.SeeitemP9 Business loss activity detailsonpage45foranexplanationofhowthenon-commercialbusinesslossruleswork.

Yournon-commercialbusinesslossdeductionmaybereducedif:n youearnednetexemptincomeinthisincomeyear,orn youbecamebankruptorwerereleasedfromanydebts

bytheoperationofanActrelatingtobankruptcy.

PhonetheBusinessInfoline(seetheinsidebackcover)formoreinformation.Foranexplanationofnetexemptincome,seequestionL1inTaxPack 2007.

Completing this itemAddupthetotalamountofallotherexpenses(includingnon-commercialbusinesslossesdeferredfromaprioryear)thatyoucandeductfromyourPSI.Writetheamountat l itemP1.

Donotincludeamountsalreadyrecordedat K itemP1.

NOTEIfyouareregisteredorrequiredtoberegisteredforGST,yourdeductionsshouldnotincludetheamountthatrelatestoinputtaxcreditentitlements.

net PsI


ToworkoutyournetPSIgothroughthefollowingsteps:

steP 1Adduptheamountsshownatm ,n ,O and J itemP1.

steP 2Adduptheamountsshownat K and l itemP1.

steP 3Takeawaytheamountcalculatedatstep2fromtheamountcalculatedatstep1.Writeyouranswerat A itemP1.

steP 4Transfertheamountat A itemP1to A item13onpage9ofyourtaxreturn(supplementarysection).

Iftheamountisaloss,youmust:n printLintheLOSSboxattherightof A itemP1n printLintheLOSSboxattherightof A item13on

yourtaxreturn(supplementarysection).

OtheR BusIness IncOmeDid you have any business income other than PSI?

YES GotoitemP2Description of main business or professional activity inthenextcolumn.

NO Readon.

FInIshIng YOuR scheduleIftheonlyincomeyouneedtoshowonyourscheduleispersonalservicesincome,younowonlyneedtocomplete:n ItemP2 Description of main business or professional

activity(below)n ItemP3 Number of business activities(below)n ItemP9 Business loss activity details

(ifyouhadaloss)(onpage45),andn ItemP10 STS depreciating assets

(ifyouareanSTStaxpayerandhaveclaimedSTSdepreciation)(onpage49).

CHECKTHATYOUHAVE… writtenyourtaxfilenumberandyourfullnameonpage1ofyourBusiness and professional items schedule for individuals 2007

transferredyournetPSIamountfrom A itemP1toA item13onyourtaxreturn(supplementarysection).Ifthisamountisaloss,checkthatyouprintedLintheLOSSboxattherightof A .

signedanddatedyourscheduleandattachedittopage3ofyourtaxreturn

completedandattachedyour Individual PAYG payment summary schedule 2007 topage3ofyourtaxreturn(ifyoureceivedPSIthatwassubjecttowithholding).

P2DESCRIPTIONOFMAINBUSINESSORPROFESSIONALACTIVITYCompleting this itemDescribe,asaccuratelyaspossible,thebusinessorprofessionalactivityfromwhichyouderivedthemostgrossincome–forexample,beefcattlebreeder,vegetablegrower,clothingmanufacturer,confectionerywholesalerorelectricalgoodsretailer.Donotusegeneraldescriptionssuchasfarmer,manufacturerorwholesaler.

PrintthedescriptionofyourmainbusinessorprofessionalactivityatitemP2onpage2ofyourschedule.

P3NUMBEROFBUSINESSACTIVITIESCompleting this itemAt B writethenumberofseparateanddistinctbusinessactivitiesyouoperatedasasoletraderandinpartnershipduring2006–07.Ifyouoperatedonlyonebusinessactivity,write1.Thenumberofbusinessactivitiesyoushowat B shouldnotbelessthanthenumberyoushowatitemP9 Business loss activity details.

P1 – P3


P4STATUSOFBUSINESSCompleting this item

Ifyouceasedyourmainbusinessduring2006–07,printXatc1itemP4onpage2ofyourschedule.

Ifyoucommencedanewbusinessduring2006–07,printXatc2 .

Ifmorethanoneoptionapplies,selectthefirstapplicableoption.Ifneitherofthemapplies,leavetheboxesblank.

P5BUSINESSNAMEOFMAINBUSINESSANDAUSTRALIANBUSINESSNUMBER(ABN)Thebusinessnameofthemainbusinessactivityshouldbeconsistentfromyeartoyear,exceptintheyearofanamechangeorwhenitisnolongerthemainbusiness.

Thebusinessnamedoesnothavetobearegisteredname.

Ifthebusinessnameislegallychanged,adviseusinwritingatthetimethechangeismade.Thecurrentbusinessnameshouldbeshownonyourtaxreturn.

Completing this itemPrintthebusinessnameandABNofyourmainbusinessatitemP5onpage2ofyourschedule.

P6BUSINESSADDRESSOFMAINBUSINESSCompleting this itemPrintthestreetaddressoftheplacewheremostofyourbusinessoperationsareconductedatitemP6onpage2ofyourschedule.

Writethepostcodeofthisaddressatd itemP6.

P7DIDYOUSELLANYGOODSORSERVICESUSINGTHEINTERNET?You need to knowYoumustanswerYESatthisitemif,inderivingincome,oneormoreofthefollowingapplied:n Youusedtheinternettoreceiveordersforgoodsand/or

services.Forexample,youreceivedordersbyemailorawebpageform(ratherthanbyconventionalpost,telephoneorfacsimile).

n Youusedtheinternettoreceivepaymentforgoodsand/orservices.Forexample,youreceived:– creditcardorchargecarddetailsbyemailor

webpageform(ratherthanbyconventionalpost,telephoneorfacsimile),or

– digitalcash.n Youusedtheinternettodelivergoodsand/orservices.

Forexample,you:– usedemail,theworldwideweborFTP(filetransfer

protocol)todeliverdigitisedmusic,newsarticlesorsoftware(ratherthanusingconventionalposttodeliversoftwareonadisk)

– usedemailinconjunctionwithawebsitetogiveadviceandreceivedapaymentinconnectionwiththisadvice

– advertisedontheinternetgoodsorservicesofotherbusinessesforafee,or

– hostedinternetsitesorprovidedaccesstotheinternet.

YoumustanswerNOatthisitemifnoneoftheaboveapplied–forexample,ifyouonlyusedtheinternetto:n advertiseyourgoodsandservicesn givesupporttoyourcustomersn buyyourstock,orn doyourbankingonline.

Completing this itemIfyouranswerisYES,printXintheYESboxatQ itemP7onpage2ofyourschedule.

IfyouranswerisNO,printXintheNOboxatQ .

P8BUSINESSINCOMEANDEXPENSESThisitemhasthreesections:n Incomen Expensesn Reconciliationitems.

TheamountstobeincludedintheIncomeandExpensessectionsofitemP8areamountsderivedfromyouraccountingsystemorfinancialstatements,exceptfor:n thevaluesofopeningandclosingstock,whicharetobe

shownattaxvaluesasexplainedonpages18–19,andn depreciationexpensesforSTStaxpayers,whichareto

beshownattaxvaluesasexplainedonpage25.

TheincomeandexpenseamountstobeincludedatitemP8shouldformpartofyourprofitandlossstatementandarethebasisforcalculatingyournetprofitorloss.YoushoulddealwithanyadjustmentstotheseamountsfortaxpurposesintheReconciliation itemssectionofitemP8.

STSTAXPAYERSIfyouhavechosentoenterorcontinueintheSTSatitemS1,youmustcompletetheincomeandexpensessectionsusingtheSTSrules.SeeSTS taxpayersonpage13.

P4 – P8


P8

goods and services taxIfyouareregisteredorrequiredtoberegisteredforGST,thefollowingapply:n Forincometaxpurposes,youshouldexcludeGST

fromassessableincome,exemptincomeandamountsreceivedorreceivablethatyoutakeintoaccountincalculatingincomeanddeductions.

n Youshouldreducedeductiblelossesandoutgoingsbytheamountofinputtaxcreditentitlement.

n Incertaincircumstances,forexample,iftherewasachangeinhowmuchyouusedanassetforbusinesspurposes,anadjustmentforGSTpurposesresultsinanamountbeingincludedinassessableincome(iftheadjustmentisaGSTdecreasingadjustment)orbeingdeductible(iftheadjustmentisaGSTincreasingadjustment).

n YoushouldalsoexcludeGSTcomponentsunderotherspecificrulesincludingcapitalgainstax(costbase,reducedcostbase,capitalproceeds)andterminationvalues.

IfyouarenotregisteredorrequiredtoberegisteredforGST,youdonotneedtoadjustyourincomeanddeductionsforGST.YoucanclaimtheGSTinclusiveamountincurredondeductibleoutgoings.

stOPYoushowpersonalservicesincomeandrelatedexpensesatitemP1,withoneexception–personalservicesincomesubjecttoforeignresidentwithholding–whichyoushowatthisitem.

IncOme

ThebusinessincometobeshownatitemP8isdividedinto:n incomefromwhichtaxhasbeenwithheldbecause

youdidnotquoteyourABNtooneofyourpayersn grosspaymentssubjecttoforeignresidentwithholdingn incomethatwassubjecttoaPAYGvoluntaryagreement

towithholdtaxn incomereceivedunderalabourhirearrangementor

fromaspecifiedpaymentn assessablegovernmentindustrypayments,andn otherbusinessincome.

stOP

DonotshowthefollowingtypesofincomeatitemP8:n grossinterest–showtheamountofincomeat

item10onyourtaxreturnn dividendsandfrankingcredits–showtheamounts

atitem11onyourtaxreturnn distributionsfrompartnershipsandtrusts–showthese

atitem12onyourtaxreturn(supplementarysection)n grossrentalorsimilarincome,suchasagistmentorhire

fees–showtheamountatitem20onyourtaxreturn(supplementarysection)

n netcapitalgains–showtheamountatitem17onyourtaxreturn(supplementarysection)

n PSIshownatP1n farmmanagementwithdrawals–showtheamount

atitem16onyourtaxreturn(supplementarysection)n attributedforeignincome–showtheamountat

item18onyourtaxreturn(supplementarysection)n foreignsourceincome–showtheamountatitem19

onyourtaxreturn(supplementarysection).


P8

STSTAXPAYERSFrom1July2005,thereisnolongerarequirementforanSTStaxpayertousetheSTSaccountingmethod(seethenoteonpage3).

However,ifyouwereanSTStaxpayerinanincomeyearthatstartedbefore1July2005,thenwhileyoucontinuetobeanSTStaxpayer(fromthefirstincomeyearthatstartsonorafter1July2005),youcanchoosetocontinueusingtheSTSaccountingmethod.

TheSTSaccountingmethodrecognisesmostincomeonlywhenitisreceived.Thistypeofincomeiscalledordinaryincome(forexample,salesofgoodsand/orservices,professionalfeesandcommissions).

IfyouareregisteredorrequiredtoberegisteredforGST,incomeamountsshouldexcludeGSTpayable.

AcontinuingSTStaxpayerusingtheSTSaccountingmethodcanclaimdeductionsforthefollowingexpensesonlywhentheyarepaid:n generaldeductions(forexample,stockpurchases,

wagesandrentofbusinesspremises)n tax-relatedexpenses,andn expensesforrepairs.

IfyouareregisteredorrequiredtoberegisteredforGST,expenseamountsshouldexcludeinputtaxcreditentitlements.

TheSTSaccountingmethoddoesnotapplytoincomeordeductionsthatreceivespecifictreatmentinincometaxlaw(forexample,netcapitalgains,dividends,depreciationexpenses,baddebtsandborrowingexpenses).

Inaddition,ifanotherprovisionofthetaxlawapportionsoralterstheassessabilityordeductibilityofaparticulartypeofordinaryincomeorgeneraldeduction,thetimingruleinthatprovisionoverridesthereceivedorpaidruleforSTStaxpayers(forexample,doublewoolclipsorprepaymentofabusinessexpenseforaperiodgreaterthan12months).BecauseofthesespecificprovisionsyoumayneedtomakeadjustmentsintheReconciliation itemssectionofitemP8.

FormoreinformationabouttheSTSaccountingmethod,visitourwebsiteorphonetheBusinessInfoline(seeinsidebackcover).IfyouarecontinuingintheSTSthisyearandhavechosentocontinueusingtheSTSaccountingmethod,youshouldbasetheamountsyouincludeatitemP8ontheSTSaccountingmethod.IfyouraccountingsystemorfinancialstatementsdonotreflecttheSTSaccountingrules,youmayneedtomakeadditionalreconciliationadjustmentsintheReconciliation itemssection.Formoreinformationabouttheseadjustments,seepages36–43.InadditiontotheSTSaccountingmethod,therearespecificSTSrulesforcapitalallowancesasexplainedonpage25,andfortradingstockasexplainedonpages18–19.

IfyouarecontinuingintheSTSthisyearandhavechosentodiscontinueusingtheSTSaccountingmethod,businessincomeandexpensesthathavenotbeenaccountedfor(becausetheyhavenotbeenreceivedorpaid)willbeaccountedforinthisyear.YoumayneedtomakeadditionalreconciliationadjustmentsintheReconciliation itemssection.Formoreinformationabouttheseadjustments,seepages36–43.

What you may needn Primaryproductionworksheet.Ifyouareaprimary

produceryouwillneedthisworksheettohelpyouworkoutsomeoftheamountsinthissection.TheworksheetisincludedinInformation for primary producers 2007 (NAT1712–6.2007)Tofindouthowtogetthispublicationseetheinsidebackcover.Completetheworksheetbeforeproceeding.

n Individual PAYG payment summary schedule2007

Did you have amounts withheld from your business income – other than PSI included at item P1?

NO GotoAssessable government industry paymentsonpage15.

YES Readon.

Iftaxhasbeenwithheldfrombusinessincomeyoushouldhavereceivedapaymentsummary.

YouwillneedtocompletetheIndividual PAYG payment summary schedule 2007beforecompletingitemP8ifyoureceivedanyofthefollowingsummaries:n Payment summary – voluntary agreementn Payment summary – withholding where ABN not quotedn Payment summary – labour hire and other specified

paymentsn Payment summary – foreign resident withholding.

TherearetwoblankcopiesoftheIndividual PAYG payment summary schedule 2007atthebackofthispublication.

Apayermayissueareceipt,remittanceorsimilardocumentinplaceofthePayment summary – withholding where ABN not quoted.

Ifyoureceivedincomefromwhichtaxwaswithheldandyoudidnotreceiveorhavelostyourpaymentsummary,contactyourpayerandaskforacopy.

how to complete the Individual PAYG payment summary schedule 2007

REMEMBERIfyouhavebothbusinessincome(itemP8)andpersonalservicesincome(itemP1)youwillneedtocompleteanIndividual PAYG payment summary schedule 2007foreachtypeofincome.

steP 1WriteyourTFNandnameintheappropriateboxesatthetopoftheschedule.

steP 2Nature of income–PrintXintheBusiness incomebox.

steP 3Foreachpaymentsummary,transferthefollowinginformationtotheschedule:n thetypeofwithholding–lookatyourpaymentsummary

carefullytodetermineitstypeandcompletetheTYPEbox,usingthefollowingkey:V voluntaryagreementS labourhireorotherspecifiedpaymentsN withholdingwhereABNnotquotedF foreignresidentwithholding


P8

n thepayer’sABNorwithholdingpayernumber(WPN)andthepayer’snameintheappropriateboxes

n thetotaltaxwithheldintheTax withheldboxn thegrosspaymentintheGross paymentbox.

steP 4 Checkthatyouhaverecordeddetailsfromallrelevantpaymentsummariesonyourpaymentsummaryschedulethenattachthescheduletopage3ofyourtaxreturn.

Donotattachthepaymentsummariestoyourtaxreturn.Youmustkeepthemforaperiodoffiveyears.

PayersmustreporttotheTaxOfficedetailsofpaymentswhereamountsoftaxhavebeenwithheld.Thisinformationwillbecross-checkedwiththatonyourtaxreturntoensurethatyouhavedeclaredthecorrectamountofincomeandthecorrectamountoftaxwithheld.

gROss PAYments WheRe AustRAlIAn BusIness numBeR (ABn) nOt QuOted

Did you have amounts of tax withheld for failure to quote an ABN?

NO GotoGross payments subject to foreign resident withholdinginthenextcolumn.

YES Readon.

You need to knowTheamountsyoushowatc andd arethetotalincomeyoureceivedfromwhichyourpayershavewithheldanamountbecauseyoudidnotquoteyourABN.Theyincludetheamountsoftaxwithheld.Youwillbeabletocalculatetheseamountsfromyourcompletedpaymentsummaryschedule.


steP 1AddupalltheGross paymentamountsonyourcompletedpaymentsummaryschedulethathaveanNintheTYPEboxderivedfromprimaryproductionactivities.Writethetotalatc itemP8onpage2ofyourschedule.Donotshowcents.

steP 2AddupalltheGross paymentamountsonyourcompletedpaymentsummaryschedulethathaveanNintheTYPEboxderivedfromnon-primaryproductionactivities.Writethetotalatd .Donotshowcents.

steP 3Adduptheamountsyouhavewrittenatc andd andwritethetotalintheadjacentTotalsbox.

Ifyoucompletec ord itemP8youmustcompleteW item14onpage10ofyourtaxreturn(supplementarysection).

gROss PAYments suBJect tO FOReIgn ResIdent WIthhOldIng

Did you receive any payments that were subject to foreign resident withholding?

NO GotoGrosspayments–voluntaryagreementbelow.

YES Readon.

You need to knowTheamountyoushowat B isthetotalincomeyoureceivedfromyourpayerswhichissubjecttoforeignresidentwithholding.Itincludesanyamountsoftaxwithheld.Youwillbeabletocalculatethisamountfromyourcompleted paymentsummaryschedule.


steP 1AddupalltheGross paymentamountsonyourcompletedpaymentsummaryschedulethathaveanFintheTYPEboxderivedfromnon-primaryproductionactivities.Writethetotalat B itemP8onpage2ofyourschedule.Donotshowcents.

steP 2Transfertheamountat B totheadjacentTotalsbox.

Ifyoucomplete B itemP8youmustcomplete e item14onpage10ofyourtaxreturn(supplementarysection).

NOTEYouwillnothaveanyprimaryproductionamountsatthisitem.Leave A blank.

gROss PAYments – vOluntARY AgReement

Did you receive any income that was subject to a PAYG voluntary agreement?

NO GotoGross payments – labour hire or other specified paymentsonpage15.

YES Readon.

You need to knowTheamountsyoushowat e and F arethetotalincomeyoureceivedthatwassubjecttoavoluntaryagreementtowithholdtaxandincludethetaxwithheld.Youwillbeabletocalculatethisamountfromyourcompletedpaymentsummaryschedule.


P8


steP 1AddupalltheGross paymentamountsonyourcompletedpaymentsummaryschedulethathaveaVintheTYPEboxderivedfromprimaryproductionactivities.Writethetotalat e itemP8onpage2ofyourschedule.Donotshowcents.

steP 2AddupalltheGross paymentamountsonyourcompletedpaymentsummaryschedulethathaveaVintheTYPEboxderivedfromnon-primaryproductionactivities.Writethetotalat F .Donotshowcents.

steP 3Adduptheamountsyouhavewrittenat e andF andwritethetotalintheadjacentTotalsbox.

Ifyoucomplete e or F itemP8youmustcompleted item14onpage10ofyourtaxreturn(supplementarysection).

gROss PAYments – lABOuR hIRe OR OtheR sPecIFIed PAYments

Did you receive:n income under a labour hire arrangement, orn a specified payment, including

– income from tutorial services provided for the Indigenous Tutorial Assistance Scheme of the Department of Education, Science and Training

– income from translation and interpretation services for the Translating and Interpreting Service of the Department of Immigration and Citizenship

– income as a performing artist in a promotional activity?

NO GotoAssessable government industry paymentsinthenextcolumn.

YES Readon.

You need to knowTheamountyoushowatO isthetotalincomeyoureceivedfromlabourhireorspecifiedpaymentsandincludesthetaxwithheld.Youwillbeabletocalculatethisamountfromyourcompletedpaymentsummaryschedule.

stOPDonotincludeincomereceivedasanemployeeofalabourhirebusiness.TheseamountswillappearonyourPAYG withholding payment summary – individual non-businessandshouldbeshownatitem1onyourtaxreturn.


steP 1AddupalltheGross paymentamountsonyourcompletedpaymentsummaryschedulethathaveanSintheTYPEbox.Theseamountsarenon-primaryproductionincome.WritethetotalatO itemP8onpage2ofyourschedule.Donotshowcents.

steP 2TransfertheamountatO totheadjacentTotalsbox.

IfyoucompleteO itemP8youmustcomplete F item14onpage10ofyourtaxreturn(supplementarysection).

NOTEYouwillnothaveanyprimaryproductionamountsatthisitem.Leaven blank.

AssessABle gOveRnment IndustRY PAYments

Did you receive assessable government industry assistance?

NO GotoOther business incomeonpage16.

YES Readon.

You need to knowGenerally,governmentcredits,grants,rebates,bountiesandsubsidiesareassessableincomeinthehandsoftherecipientiftheyarereceivedin,orinrelationto,thecarryingonofabusiness.Thisgenerallyincludesamountsofacapitalnature.However,amountsrelatingtothecommencementorcessationofabusinessmaynotbeassessableincomebutmaygiverisetoacapitalgain.

Examplesofassessablegovernmentindustryassistanceare:n bountiesn cleanerfuelgrantsn droughtreliefn employeesubsidiesn exportincentivegrantsn fuelgrantundertheenergygrantscreditsschemen fueltaxcreditsn industryrestructuringandadjustmentpaymentsn producerrebate(wineequalisationtax),andn productstewardship(oil)benefit.

Formoreinformation,seeTaxation Ruling TR 2006/3 – Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business.

stOPDonotshow‘Medicarepaymentsreceivedbymedicalpractices’atthisitem.ShowthematOther business income.


P8


steP 1Writeyourtotalprimaryproductiongovernmentindustrypaymentsreceivedbyeachbusinessatg itemP8onpage2ofyourschedule.Donotshowcents.

NOTEIfyouhavecompletedtheGross income from primary productionworksheetinInformation for primary producers 2007,includeatg theamountatPP11ontheworksheet.

steP 2Ifyourassessableprimaryproductiongovernmentindustrypaymentsincludeafuelgrantundertheenergygrantscreditsschemeorfueltaxcredits,printDintheTYPEboxattherightoftheamountatg .

steP 3Writeyourtotalnon-primaryproductiongovernmentindustrypaymentsreceivedbyeachbusinessath .Donotshowcents.

steP 4 Ifyourassessablenon-primaryproductiongovernmentindustrypaymentsincludeafuelgrantundertheenergygrantscreditsschemeorfueltaxcredits,printDintheTYPEboxattherightoftheamountath .

steP 5Adduptheamountsyouhavewrittenatg andh andwritethetotalintheadjacentTotalsbox.

OtheR BusIness IncOme

Did you receive any other business income?

NO GotoTotal business incomeinthenextcolumn.

YES Readon.

You need to knowOtherbusinessincomeincludes:n grosssalesoftradingstockn grosssalesfromproducen goodstakenfromstockforyourownusen valueoflivestockkilledforrationsn valueoflivestockexchangedforothergoodsorservicesn grossearningsfromservicesn taxidriverearnings(incomeyouearnedasa

non-employeetaxidriverifitisnotshownatitemP1)n amountsreceivedasrecoupmentofexpensesn baddebtsrecoveredn profitonsaleofdepreciatingassetsn royaltiesn insurancerecoveriesn subsidiesn employeecontributionsforfringebenefitsn assessablenon-governmentassistancefromallsources,

andn foreignexchange(forex)gains–formoreinformation

aboutforexgains,visitourwebsiteorseequestion22inTaxPack 2007 supplement.

Your‘otherbusinessincome’excludesamountsshownatc ,d , B , e , F ,O ,g andh onyourschedule.

Ifyouareaprimaryproducer,youmustaddtheamountsshownatPP1,PP2,PP6,PP7andPP10onyourGross income from primary productionworksheet.ThisworksheetisincludedinthepublicationInformation for primary producers 2007.Youmustaddthetotaltoanyotherincomefromabusinessofprimaryproductionreferredtoabove.Youshowthetotalofallotherincomefromthebusinessofprimaryproductionat I itemP8onpage2ofyourschedule.


steP 1Writeyourtotalamountof‘other’primaryproductionbusinessincomeorlossat I itemP8onpage2ofyourschedule.Donotshowcents.

steP 2Ifyoumadealoss,printLintheboxattherightoftheamountat I .

steP 3Writeyourtotalamountof‘other’non-primaryproductionbusinessincomeorlossat J .Donotshowcents.

steP 4Ifyoumadealoss,printLintheboxattherightoftheamountat J .

steP 5Addupyour‘other’primaryproductionandnon-primaryproductionbusinessincomeorlossandwritethetotalintheadjacentTotalsbox.

steP 6Ifyoumadealoss,printLintheboxattherightoftheTotalsbox.

tOtAl BusIness IncOme


steP 1Adduptheprimaryproductionamountsshownatc , e ,g ,and I itemP8onyourschedule.WritethetotalatTOTAL BUSINESS INCOMEinthePrimaryproduction column.Rememberthat A andn willbeblank.

steP 2Ifyoumadealoss,printLintheboxattherightoftheamountatTOTAL BUSINESS INCOMEinthePrimaryproductioncolumn.

steP 3Addupthenon-primaryproductionamountsshownatd , B , F ,O ,h and J itemP8.WritethetotalatTOTAL BUSINESS INCOMEintheNon-primaryproductioncolumn.

steP 4Ifyoumadealoss,printLintheboxattherightoftheamountatTOTAL BUSINESS INCOMEintheNon-primaryproductioncolumn.

steP 5AdduptheamountsatTOTAL BUSINESS INCOMEinthePrimaryproductionandNon-primaryproductioncolumnsandwritethetotalintheadjacentTotalsbox.Ifyoumadealoss,printLintheboxattherightofthisamount.


P8

eXPenses

stOPDo not include the following expense items on your schedule:n non-businessinterestanddividendincome

expenses–claimdeductibleexpensesatitemD7onyourtaxreturn

n farmmanagementdeposits–takethemintoaccountasrequiredatitem16onyourtaxreturn(supplementarysection)

n non-businessrentalexpenses–claimdeductibleexpensesatitem20onyourtaxreturn(supplementarysection)

n expensesandlossesrelatingtoforeignsourceincome–takethemintoaccountasrequiredatitem19or,inthecaseofcertaindebtdeductions,claimthematitemD15onyourtaxreturn(supplementarysection)

n expensesrelatingtoyourpersonalservicesincomeshownatitemP1onyourschedule

n low-valuepooldeductionwherethepoolcontainsassetsusedforwork-related,self-educationorrentalpurposes–readquestionD6inTaxPack 2007.

Youneedtocompleteallitemsthatrelatetoyourbusinessorbusinesses.Youcandeductbusinessexpensesiftheexpenseswerenecessarytocarryonyourbusinessforthepurposeofearningassessableincome.

Ifyouareaprimaryproduceryouwillneedaprimaryproductionworksheettohelpyouworkoutsomeoftheamountsinthissection.ThisworksheetisincludedinthepublicationInformation for primary producers 2007.Completetheworksheetbeforeproceeding.

goods and services taxIfyouareregisteredorrequiredtoberegisteredforGST,excludefromthedeductionsanyinputtaxcreditentitlementsthatariseinrelationtooutgoings.IfyoupayGSTbyinstalmentsandincurredapenaltyforunderestimatingavariedGSTinstalment,youcanclaimadeductionforthepenaltyatitemD10onyourtaxreturn.DonotshowthepenaltyonyourBusiness and professional items schedule for individuals 2007.Formoreinformation,seeTaxPack 2007.

RecORds YOu need tO KeePYoumustkeepyourbusinessexpensesrecordsforfiveyearsafteryoupreparedorobtainedthem,orfiveyearsafteryoucompletedthetransactionsoractstowhichtheyrelate,whicheveristhelater.

PRePAYments OF $1,000 OR mOReIfyoumadeaprepaymentof$1,000ormoreforsomethingtobedone(inwholeorinpart)inafutureincomeyear,thetimingofyourdeductionmaybeaffectedbytherulesrelatingtoprepayments.Generally,youwillneedtoapportionyourdeductionforprepaidbusinessexpenditureovertheserviceperiodor10years,whicheverisless.Therearesomeexceptionsunderthe12-monthruleforSTStaxpayersandthespecialrulesrelatingtoplantationforestrymanagedagreements.Formoreinformation,seethepublicationDeductions for prepaid expenses 2007(NAT4170–6.2007).

WhereexpensesshownatitemP8includeprepaidexpensesthatdifferfromtheamountsallowableasdeductionsinthe2006–07incomeyear,makeanexpensereconciliationadjustmentath itemP8.

thIn cAPItAlIsAtIOnThethincapitalisationprovisionsapplytoentities(includingindividuals)toreducecertaindeductions(called‘debtdeductions’)forcostsincurredinobtainingandservicingdebtfinancewherethedebtapplicabletoAustralianoperationsexceedsthelimitssetoutinDivision820oftheIncome Tax Assessment Act 1997(ITAA1997).

do the thin capitalisation provisions apply to you?Thethincapitalisationruleswillapplytoyouif:n youareanAustralianresidentandyou,oranyof

yourassociateentities,areanAustraliancontrollerofaforeignentityorcarryonbusinessoverseasatorthroughapermanentestablishment,or

n youareaforeignresidentandyoucarryonbusinessinAustraliaatorthroughapermanentestablishmentorotherwisehaveAustralianincome-producingassets.

Thethincapitalisationruleswillnotapplytoyouif:n yourdebtdeductions(combinedwiththedebt

deductionsofyourassociateentities)donotexceed$250,000intheincomeyear,or

n youareanAustralianresidentandthecombinedvalueofyourandyourassociates’Australianassetsisnotlessthan90%ofthevalueofyourandyourassociates’totalassets.

Ifthethincapitalisationrulesapplytoyou,youmustcompletetheThin capitalisation schedule 2007 (NAT6458–6.2007).Theamountofanydebtdeductionsyoucanclaimmaybereducedbytheserules.Formoreinformation,seetheThin capitalisationguide (NAT4461)whichisavailableonourwebsite.

Completethethincapitalisationscheduleandpostitto:Australian Taxation Office PO Box 1365 Albury NSW 2640


P8

OPenIng stOcK

Did you have trading stock on hand at the start of the year?

NO GotoPurchases and other costsinthenextcolumn.

YES Readon.

You need to knowTheopeningvalueofanitemofstockmustequalitsclosingvalueinthepreviousyear.Thetotalvalueofallstockonhandatthestartoftheyearisequaltotheamountshownasclosingstockonyour2006schedule.

Ifyouareaprimaryproducer,youmustaddthevalueofyouropeningstockfromyourlivestockaccountatPP4onyourprimaryproductionworksheettothevalueofyouropeningstockfromyourproduceaccountatPP9onyourprimaryproductionworksheet.Thetotaloftheseamountsisthetotalvalueofyourprimaryproductionopeningstock.

Donotincludeanyamountsrepresentingopeningstockofabusinesswhichcommencedoperationsduringtheyear.IncludethepurchasecostsoftheseitemsintherelevantPurchases and other costsbox.


steP 1WritethetotalvalueofyourprimaryproductionopeningstockatOpening stockinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writethetotalvalueofyournon-primaryproductionopeningstockatOpening stockintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductionopeningstockvaluesandwritethetotalat K .

PuRchAses And OtheR cOsts

Did you have purchases and other costs?

NO GotoClosing stockonpage19.

YES Readon.

You need to knowThisrepresentsthedirectcostofmaterialsusedformanufacture,saleorexchangeinderivingthegrossproceedsorearningsofthebusiness.Itincludesinwardsfreight.Italsoincludesthecostofstockacquiredwhenstartingoracquiringabusinessduringtheyear.Itmayalsoincludesomecostsforlabourandservicesprovidedundercontractifthesearerecordedinthecostofsalesaccountinyourbusinessbooksofaccount.Ifso,donotalsoincludethisamountasContractor, sub-contractor and commission expenses.

Ifyouareaprimaryproducer,youmustincludethevalueofyourpurchasesfromyourlivestockaccountatPP5onyourprimaryproductionworksheet.


steP 1Workoutthevalueofyourprimaryproductionpurchasesandothercostsdirectlyrelatedtotradingstock.Ifyouhavemorethanonebusiness,addupallyourprimaryproductionpurchasesandcosts.

steP 2WritethetotalvalueofyourprimaryproductionpurchasesandothercostsdirectlyrelatedtotradingstockatPurchases and other costsinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 3Workoutthevalueofyournon-primaryproductionpurchasesandothercostsdirectlyrelatedtotradingstock.Ifyouhavemorethanonebusiness,addupallyournon-primaryproductionpurchasesandothercosts.

steP 4Writethetotalvalueofyournon-primaryproductionpurchasesandothercostsdirectlyrelatedtotradingstockatPurchases and other costsintheNon-primaryproductioncolumn.Donotshowcents.

steP 5Addupyourprimaryproductionandnon-primaryproductionpurchasesandothercostsdirectlyrelatedtotradingstockandwritethetotalat l .

STSTAXPAYERSIfyouarecontinuingintheSTSthisyearandhavechosentocontinueusingtheSTSaccountingmethod,onlyshowpurchasesandothercoststhatyouhavepaidat l .(SeeSTS taxpayers onthenextpage).


P8

clOsIng stOcK

Did you have trading stock on hand at the end of the year?

NO GotoCost of salesonpage20.

YES Readon.

IfyouhavechosentoenterorcontinueintheSTSatitemS1,readon.OtherwisegotoOther businessesinthenextcolumn.

sts tAXPAYeRsYou need to knowYouneedtoaccountforchangesinthevalueofyourtradingstockonlyifthereisadifferenceofmorethan$5,000betweenthevalueofallyourstockonhandatthestartoftheincomeyearandareasonableestimateofthevalueofallyourstockonhandattheendoftheincomeyear.

Thevalueofyourstockonhandatthestartoftheincomeyearisthesamevalueastheclosingvalueshownonyourscheduleinthepreviousyear.Thismaynotnecessarilyreflecttheactualvalueofyourstockifyoudidnotaccountforthechangeinvalueofyourstockinthepreviousyear.Formoreinformationonareasonableestimateofthevalueofstock,seeourpublicationSimplified tax system: simplified trading stock rules (NAT4107),visitourwebsiteorphonetheBusinessInfoline(seetheinsidebackcover).

Youcanstillchoosetoconductastocktakeandaccountforchangesinthevalueoftradingstock,ifyouwish.

Is the difference between the value of your opening stock and a reasonable estimate of your closing stock more than $5,000?

YES Youmustaccountforchangesinthevalueofyourtradingstock.Gotostep2.

NO Ifyouchoosenottoaccountforchangesinthevalueofyourtradingstock,gotostep1.Otherwisegotostep2.


steP 1Ifthedifferencereferredtoaboveis$5,000orlessandyouchoosenottoaccountforthisdifference,theclosingstockvaluesyouputinboththePrimaryproductionandNon-primaryproductioncolumnsatitemP8onpage3ofyourschedulemustbethesameasthevaluesyouputatOpening stock.Donotputyourreasonableestimate.

Addupyourprimaryproductionandnon-primaryproductionclosingstockvaluesandwritethetotalatm .

WriteintheTYPEboxattherightofm thecodeletteryouusedlastyeartovalueclosingstock:C costM marketsellingvalueR replacementvalue.

Ifthisisyourfirstyearinbusinessthevalueofyourclosingstockwillbezero.WriteCintheTYPEbox.

GotoCost of salesonpage20.

steP 2Ifthedifferencereferredtoaboveismorethan$5,000oryouchoosetoaccountforthedifferenceintradingstock,theclosingstockvaluesmustbebroughttoaccountundersection70-35oftheITAA1997.ReadOther businessesbelowforinformationonhowtocompletethisitem.

Youmustincludeinyourclosingstockvalueatm itemP8thevalueofallstockonhand,regardlessofwhetheryouhavepaidforthestock.

OtheR BusInessesYou need to knowThisisthetotalvalueofalltradingstockonhandattheendoftheyear.TheamountthatisshownatClosing stockisthetotalofthevalueofeachitemoftradingstockcalculatedfortaxpurposesundersection70-45oftheITAA1997.

Tradingstockisanythingyouhaveonhandwhichyouproduced,manufactured,acquiredorpurchasedforthepurposeofsale,manufactureorexchange.Forexample,tradingstockincludeslivestockbutnotworkinganimals(exceptthoseusedbyaprimaryproducer),cropsandtimberwhenharvestedandwoolafteritisremovedfromthesheep.

Manufacturersmustincludeastradingstockpartlymanufacturedgoodsandmaterialsonhand.However,closingstockexcludesanyamountthatrepresentedclosingstockofabusinessthatceasedoperationsduringtheyear.ThisamountisincludedinOther business incomeat I or J intheIncomesectionofitemP8.Formoredetailsaboutwhatconstitutestradingstock,visitourwebsiteorphonetheBusinessInfoline(seetheinsidebackcover).

Youcanchooseoneofthefollowingthreemethodstovalueyourtradingstock:n costn marketsellingvaluen replacementvalue.

Youmayelecttovalueanitemoftradingstockbelowthelowestvaluecalculatedbyanyofthesemethodsbecauseofobsolescenceorotherspecialcircumstances.

Thevalueyouelectmustbereasonable.Whereyouelecttovalueanitemoftradingstockbelowcost,marketsellingvalueandreplacementvalue,youmustcompleteitemP19onyourschedule.


P8

Youmayusedifferentmethodstocalculateeachitemoftradingstockindifferentyearsorfordifferentitemsinthesameyear.However,theopeningvalueofeachiteminaparticularyearmustbethesameastheclosingvalueforthatiteminthepreviousyear.

IfyouareregisteredforGST,thevalueofclosingstockshouldnotincludeanamountequaltotheinputtaxcreditthatwouldariseifyouhadacquiredtheitemsolelyforbusinesspurposesattheendoftheincomeyear.Inputtaxcreditsdonotariseforsomeitemsoftradingstock,suchasshares.

Ifyouareaprimaryproducer,youmustaddthevalueofyourclosingstockfromyourlivestockaccountatPP3onyourprimaryproductionworksheettothevalueofyourclosingstockfromyourproduceaccountatPP8onyourprimaryproductionworksheet.

Thetotaloftheseamountsisthetotalvalueofyourprimaryproductionclosingstock.

AsthetaxvaluesofclosingstockonhandareshownatPP3andatPP8onyourprimaryproductionworksheet,youcannotreducethesevaluesbyaccountingentries.Keeprecordsshowinghoweachitemwasvalued.


steP 1Workoutthevalueofyourprimaryproductionclosingstock.Ifyouhavemorethanonebusiness,addupallyourprimaryproductionclosingstockvalues.

steP 2WritethetotalvalueofyourprimaryproductionclosingstockatClosing stockinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 3Workoutthevalueofyournon-primaryproductionclosingstock.Ifyouhavemorethanonebusiness,addupallyournon-primaryproductionclosingstockvalues.

steP 4Writethetotalvalueofyournon-primaryproductionclosingstockatClosing stockintheNon-primaryproductioncolumn.Donotshowcents.

steP 5Addupyourprimaryproductionandnon-primaryproductionclosingstockvaluesandwritethetotalatm .

steP 6Fromthelistbelow,findtheletterthatmatchesthemethodyouusedtovalueclosingstock.Ifmorethanonemethodwasused,selecttheletterthatappliestothelargestvalue:C costM marketsellingvalueR replacementvalue.

steP 7PrinttheletterintheTYPEboxattherightoftheamountatm .

cOst OF sAles

Did you have any cost of sales?

NO GotoForeign resident withholding expensesonpage21.

YES Readon.

You need to knowGoodstakenforyourownuseshouldnotbeaccountedforasstockonhandat30June2007.Includeat I and J Other business incomeintheIncomesectionofitemP8onyourschedulethevalueof:n livestockkilledforrationsn livestockexchangedforothergoodsorservices,andn goodstakenforyourownuse.

Useworksheet3toworkoutyourcostofsales.

WORKsheet 3: Cost of sales

Primary production

Non-primary production

Stockat1July2006 (a) $ $

Purchasesatcost (b) $ $

Freightinwards (c) $ $

Other–forexample,labourandservices (d) $ $

Add(a),(b),(c)and(d). (e) $ $

Stockat30June2007 (f) $ $

Your cost of salesTakeaway(f)from(e). $ $

Forfurtherinformationonstockonhandat1July2006,readOpening stockonpage18.Forinformationonstockonhandat30June2007,readClosing stockonpage19.


steP 1WriteyourtotalprimaryproductioncostofsalesatCost of salesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2IfthecostofsalesinthePrimaryproductioncolumn–aftertakingaway(f)from(e)–isanegativeamount,printLintheboxattherightofthisamount.

steP 3Writeyourtotalnon-primaryproductioncostofsalesatCost of salesintheNon-primaryproductioncolumn.Donotshowcents.


P8

steP 4IfthecostofsalesintheNon-primaryproductioncolumn–aftertaking(f)awayfrom(e)–isanegativeamount,printLintheboxattherightofthisamount.

steP 5Addupyourprimaryproductionandnon-primaryproductioncostofsalesandwritethetotalatCost of salesintheTotalscolumn.

steP 6Ifyourtotalcostofsalesisanegativeamount,printLintheboxattherightofthisamount.

FOReIgn ResIdent WIthhOldIng eXPenses

Did you have any expenses directly relating to income subject to foreign resident withholding?

NO GotoContractor, sub-contractor and commission expensesinthenextcolumn.

YES Readon.


steP 1Writeyourtotalnon-primaryproductionforeignresidentwithholdingexpensesatForeign resident withholding expensesintheNon-primaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Transfertheamountyouwroteatstep1totheadjacentTotalsboxatu .

NOTEYouwillnothaveanyprimaryproductionamountsatthisitem.

cOntRActOR, suB-cOntRActOR And cOmmIssIOn eXPenses

Did you have any contractor, sub-contractor or commission expenses in your business?

NO GotoSuperannuation expensesonpage22.

YES Readon.

You need to knowTheseareexpensesforlabourandservicesprovidedundercontract–otherthansalariesorwages–forexample:n paymentstoself-employedpeoplesuchasconsultants

andcontractors,includingpaymentssubjecttoaPAYGvoluntaryagreementtowithholdandpaymentsmadeunderalabourhirearrangement

n commissionspaidtopeoplenotreceivingaretainern agencyfees–forexample,advertisingn servicefees–forexample,plantservicen managementfees,andn consultantfees.

Donotincludethefollowingatthisitem:n expensesforexternallabourwhichhavebeenincluded

inthebusinesscostofsalesaccountn expensesforaccountingorlegalservices–include

theseatAll other expenses.


steP 1Writeyourtotalprimaryproductioncontractor,sub-contractorandcommissionexpensesatContractor, sub-contractor and commission expensesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductioncontractor,sub-contractorandcommissionexpensesatContractor, sub-contractor and commission expensesintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductioncontractor,sub-contractorandcommissionexpensesandwritethetotalat F .


P8

suPeRAnnuAtIOn eXPenses

Did you make any superannuation contributions on behalf of eligible employees or their dependants as a business expense?

NO GotoBad debts inthenextcolumn.

YES Readon.

You need to knowShowsuperannuationexpensesfortheyearofincome.Donotincludeanyamountthatwasacontributionforyourself.ThedeductionforyourownsuperannuationcontributionsmustbeclaimedatitemD13onyourtaxreturn(supplementarysection).SeequestionD13inTaxPack 2007 supplement.

Employersareentitledtoadeductionforcontributionsmadetoacomplyingsuperannuation,provident,benefitorretirementfundorretirementsavingsaccount(RSA)wherethecontributionistoprovidesuperannuationbenefitsforeligibleemployeesortoprovidebenefitstotheemployee’sdependantsontheemployee’sdeath.Superannuationbenefitsmeanindividualpersonalbenefits,pensionsorretiringallowances.Adeductionisallowableintheincomeyearinwhichthecontributionsaremade.

Contributionsmadetoanon-complyingfund:n arenotallowableasadeduction,andn donotcounttowardssuperannuationguarantee

obligations.

UnderthesuperannuationguaranteeanemployerneedstoprovideaminimumlevelofsuperannuationforeligibleemployeesorpayataxcalledthesuperannuationguaranteechargetotheCommissioner.Thesuperannuationguaranteechargeisnotasuperannuationcontributionandisnottaxdeductible.Anylatecontributionthatisusedtoreducetheamountofsuperannuationguaranteechargeemployershavetopayunderthesuperannuationguaranteelatepaymentoffsetmeasureisalsonotdeductible.

Contributionspaidbyanemployerforeligibleemployeestoanon-complyingsuperannuationfundarefringebenefits–otherthanwherethecontributionsaremadeforanexemptvisitor–andmaybesubjecttotaxundertheFringe Benefits Tax Assessment Act 1986.

TheamountofcontributionsthatcanbeclaimedasadeductionbyanemployercontributingtoaresidentcomplyingsuperannuationfundorRSAinrespectofeligibleemployeesislimitedbytheageofeachrelevantemployee.

Whereanemployeehasreachedtheageof70,thereisafurtherrestrictiononthedeductionthatcanbeclaimedforanemployercontributiontoacomplyingsuperannuationfundorRSA.

Forthe2006–07incomeyeartheage-basedlimitsareasfollows:

tABle 1: Employee deduction limit

Age in years Deduction limit

under35 $15,260

35to49 $42,385

50andover* $105,113*

*Forcontributionsmadeafterthe28thdayofthemonthfollowingtheemployee’s70thbirthday,thedeductionclaimableislimitedtotheamountofthecontributionrequired:(i) underafederal,stateorterritoryaward,or(ii) tomeettheemployer’ssuperannuationguarantee

obligationonsalaryorwagespaidtotheemployeebeforetheemployee’s70thbirthday.

Theemployee’sagelimitisdeterminedattheendofthedayonwhichtheemployer,orassociateoftheemployer,madethelastcontributionfortheincomeyearforthebenefitoftheemployee.


STEP 1WriteyourtotalprimaryproductionsuperannuationcontributionsatSuperannuation expensesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductionsuperannuationcontributionsatSuperannuation expensesintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductionsuperannuationcontributionsandwritethetotalatg .

BAd deBts

Did you write off any bad debts in your business?

NO GotoLease expensesonpage23.

YES Readon.


P8

You need to knowIncludeincomefromtherecoveryofbaddebtsinOther business incomeat I or J intheIncomesectionofitemP8.

Youarenotallowedadeductionforbaddebtsunlessyouhavepreviouslyincludedtheamountinyourassessableincomeoritisformoneyyoulentintheordinarycourseofamoney-lendingbusinesscarriedonbyyou.

Donotincludeaccountingprovisionsfordoubtfuldebtsat I .YoushowthemintheExpensessectionatAll other expenses, thenaddthembackath Expense reconciliation adjustmentsintheReconciliation itemssection.

Beforeyoucanclaimabaddebt,itmustbebadandnotmerelydoubtful.Thequestionofwhetheradebtisabaddebtwilldependonthefactsineachcaseand,whereapplicable,theactiontakenforrecovery.

Formoreinformation,seeTaxation Ruling TR 92/18 – Income tax: bad debts.

Youcanclaimadeductionfor:n Partialdebtwrite-offs–whereonlypartofadebtis

badandiswrittenoff,youmayclaimadeductionfortheamountwrittenoff.

n Lossesincurredindebt-for-equityswapsfordebtwrittenoffafter26February1992–whereunderanarrangementyoudischarge,releaseorotherwiseextinguishthewholeorpartofadebtowedtoyouinreturnforequityinthedebtor.Youcanclaimadeductionforthedifferencebetweentheamountofthedebtandthegreaterofthemarketvalueoftheequityatthetimeofissueorthevalueoftheequityrecordedinyourbooksatthetimeofissue.Themarketvalueoftheequityisthepricequotedonthestockexchangeor,iftheequityisnotlisted,thenetassetbackingoftheequity.

Whereyouarenotinthebusinessoflendingmoney,thedeductionislimitedtotheamountofthedebtyouhaveincludedinassessableincome.

Records you need to keepKeepastatementforalldebtorswhosebaddebtsyouwroteoffduringtheyear,showing:n theirnameandaddressn theamountofthedebtn thereasonyouregardedthedebtasbad,andn theyearthatyoureturnedtheamountasincome.


steP 1WriteyourtotalprimaryproductionbaddebtsatBad debtsinthePrimaryproduction column,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductionbaddebtsatBad debtsintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductionbaddebtsandwritethetotalat I .

leAse eXPenses

Did you have lease expenses in your business?

NO GotoRent expensesonpage24.

YES Readon.

You need to knowThisisexpenditureincurredthroughbothfinancialandoperatingleasesonleasingassetssuchasmotorvehiclesandplant.Donotincludethecostofleasingrealestate(showthiscostatRent expensesonpage24)orcapitalexpenditureincurredtoterminatealeaseorlicence.However,afive-yearstraight-linewrite-offisallowedforcertaincapitalexpenditureincurredtoterminatealeaseorlicenceiftheexpenditureisincurredinthecourseofcarryingonabusiness,orinconnectionwithceasingtocarryonabusiness.Seeworksheet6onpage41andnote3onpage41andthedetailsunderChange3inthefactsheetBlackhole expenditure: business related expenses (availableonourwebsite).

Insomecircumstances,leaseexpensesmaybedebtdeductionsforthepurposesofthethincapitalisationrules.Formoreinformationonthincapitalisation,seepage17.

NOTEIfyouincludeanamountofleaseexpensewhichisnotallowableasadeduction,suchasamountsdisallowedunderthethincapitalisationrules,youwillneedtoaddbacktheamountath Expense reconciliation adjustmentsintheReconciliation itemssectiononyourschedule.

Expensesincurredunderahirepurchaseagreementarenotleaseexpenses.Suchexpensesaredealtwithath Expense reconciliation adjustmentsintheReconciliation itemsonyourschedule.

Specialrulesapplytoleasedcarsifthecostofthecarexceedsthecarlimitthatappliesforthefinancialyearinwhichtheleasecommences.Thecarlimitfor2006–07is$57,009.Ifyouleaseacarthatissubjecttothespecialrules,thereconciliationbetweentheleaseexpenseandthetaxtreatmentiscarriedoutath Expense reconciliation adjustmentsintheReconciliation items section.Formoreinformation,seeLuxury car leasingonpage39.

Records you need to keepListtheassetsleasedandkeepfulldetailsofleasingexpensesforeachitem–includingmotorvehicles–anddetailsofanyprivateuse.Leasingexpensesofcertaincarsfallunderthesubstantiationrules.


steP 1WriteyourtotalprimaryproductionleaseexpensesatLease expensesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.


P8

steP 2Writeyourtotalnon-primaryproductionleaseexpensesatLease expensesintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductionleaseexpensesandwritethetotalat J .

Rent eXPensesDid you have rent as a business expense?

NO GotoInterest expenses within Australiabelow.

YES Readon.

You need to knowThisisexpenditureyouincurredasatenantforrentaloflandandbuildingsusedintheproductionofincome.Includethecostofleasingrealestate.

Completing this itemsteP 1WriteyourtotalprimaryproductionrentexpensesatRent expensesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductionrentexpensesatRent expensesintheNon-primaryproductioncolumn.Donotshowcents.steP 3Addupyourprimaryproductionandnon-primaryproductionrentexpensesandwritethetotalat K .

InteRest eXPenses WIthIn AustRAlIADid you incur interest as a business expense on money borrowed within Australia?

NO GotoInterest expenses overseas inthenextcolumn.

YES Readon.

You need to knowIncludeinterestyouincurredonmoneyborrowedwithinAustraliatoacquireincome-producingassetsusedinyourbusiness,tofinancebusinessoperationsortomeetcurrentbusinessexpenses.Donotincludeinterestincurredinderivingrentalincome.Claimthisatitem20onyourtaxreturn(supplementarysection).

NOTEIfyouincludeanamountofinterestwhichisnotallowableasadeduction,suchasamountsdeniedbythethincapitalisationrules,youwillneedtoaddbacktheamountath Expense reconciliation adjustmentsintheReconciliation itemssectiononyourschedule.Formoreinformationonthincapitalisation,seepage17.

Completing this itemsteP 1WriteyourtotalprimaryproductioninterestexpenseswithinAustraliaatInterest expenses within AustraliainthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductioninterestexpenseswithinAustraliaatInterest expenses within AustraliaintheNon-primaryproductioncolumn,itemP8onyourschedule.Donotshowcents.steP 3Addupyourprimaryproductionandnon-primaryproductioninterestexpenseswithinAustraliaandwritethetotalatQ .

InteRest eXPenses OveRseAs

Did you incur interest as a business expense on money borrowed overseas?

NO GotoDepreciation expensesonpage25.

YES Readon.

You need to knowIncludeanyinterestincurredonmoneyborrowedfromoverseassourcestoacquireincome-producingassetsusedinyourbusiness,tofinancebusinessoperationsortomeetcurrentbusinessexpenses.Donotincludeinterestincurredinderivingrentalincome.Claimthisatitem20onyourtaxreturn(supplementarysection).

Generally,anamountofwithholdingtaxisrequiredtobewithheldfrominterestpaidorpayabletonon-residentsandfrominterestderivedbyaresidentthroughanoverseasbranch.TheseamountsmustbesenttotheTaxOffice.

Ifyoupaidorcreditedanyinterestoramountsinthenatureofinteresttoanon-residentofAustraliaortoaresident’soverseasbranch,youwillneedtoprovideadditionalinformation.PrintSCHEDULEOFADDITIONALINFORMATION–ITEM14onthetopofaseparatepieceofpaper.Showthenameandaddressofeachrecipient,totalamountspaidorcreditedtoeachnon-residentoroverseasbranchofaresidentandtheamountoftaxwithheld.Ifnotaxwaswithheld,pleasestatethereasonforthis.Includeyourname,addressandTFN.PrintXintheYESboxatTaxpayer’s declarationquestion2aonyourtaxreturn.Signandattachthescheduletopage3ofyourtaxreturn.

Formoreinformationonthetaxtreatmentofinterestanddividendspaidtonon-residents,phonetheBusinessInfoline(seetheinsidebackcover).

NOTEIfyouincludeanamountofinterestwhichisnotallowableasadeduction,suchasamountsdeniedbythethincapitalisationrules,youwillneedtoaddbacktheamountath Expense reconciliation adjustmentsintheReconciliation itemssectiononyourschedule.Formoreinformationonthincapitalisation,seepage17.


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steP 1WriteyourtotalprimaryproductionoverseasinterestexpensesatInterest expenses overseasinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductionoverseasinterestexpensesatInterest expenses overseasintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductionoverseasinterestexpensesandwritethetotalat R .

dePRecIAtIOn eXPenses

Did you have depreciation as a business expense?

NO GotoMotor vehicle expensesonpage29.

YES IfyouhavechosentoenterorcontinueintheSTSatitemS1,readon.OtherwisegotoOther businessesonpage28.

stOPIfyoudidnotcarryonabusinessintheincomeyear,butinaprioryearallocatedassetstoageneralSTSpoolorlonglifeSTSpool,donotincludetheSTSpooldeductionsatthisquestion.ShowsuchdeductionsatitemD15onyourtaxreturn(supplementarysection).

sts tAXPAYeRsYou need to knowYoushowatm Depreciation expensesitemP8thetotaldepreciationdeductionsbeingclaimedundertheSTScapitalallowances(depreciation)rulesandforthebusinessuseofotherassetsundertheuniformcapitalallowances(UCA)rules.ThisincludesyourdeductionundertheSTScapitalallowances(depreciation)rulesfordepreciatingassetsusedforwork-relatedorself-educationpurposes.HoweverthisexcludesanyamountincludedatpartBofitemP1.YoudonotneedtocompleteaCapital allowances schedule 2007.

STStaxpayerscanclaimanimmediatedeductionformostdepreciatingassetscostinglessthan$1,000(excludinginputtaxcreditentitlements)andcanpoolmostoftheirotherdepreciatingassets.TherearetwoSTSpools:n ageneralSTSpoolfordepreciatingassetswithan

effectivelifeoflessthan25yearsn alonglifeSTSpoolfordepreciatingassetswithan

effectivelifeof25yearsormore.

SomedepreciatingassetsareexcludedfromtheSTSrulesbutadeductionmaybeavailableundertheUCArules.

FormoreinformationabouttheSTScapitalallowances(depreciation)rules,seeourpublicationThe simplified tax system – a guide for tax agents and small businesses,visitourwebsiteorphonetheBusinessInfoline(seetheinsidebackcover).

calculating your depreciation deductionsIfyouraccountingsystemorfinancialstatementsprovideyouwiththeamountstocompleteworksheet4onpage28,writetheseamountsintheworksheet.Otherwise,usecalculations1to5belowtocalculateyourdepreciationdeductions.

Theamountsyouwriteinworksheet4 onpage28mustbetaxvaluesandnotaccountingvalues.

Calculation 1: Low-cost assetsAlow-costassetisanasset:n whosecostattheendoftheyearwaslessthan

$1,000(excludinginputtaxcreditentitlements),andn thatqualifiesforadeductionundertheSTScapital

allowances(depreciation)rules.

Workoutthetaxablepurposeproportionofeachdepreciatinglow-costassetyouacquiredin2006–07andusedorheldreadyforuseforthepurposeofproducingassessableincome.Youcalculatethedeductionforeacheligibleassetasfollows:

asset’sadjustablevalue taxablepurposeproportion

Adduptheseresultsandwritethetotalat(a)inworksheet4onpage28.

Donotincludedepreciatingassetswhichcostlessthan$1,000(excludinginputtaxcreditentitlements)thatyouacquiredbeforeenteringtheSTS.YouallocatetheseassetstothegeneralSTSpool(seecalculation2).

NOTETheadjustable valueofadepreciatinglow-costasset,atthetimeyoufirstusedit(orhelditreadyforuse)forataxablepurpose,willbeitscost,unlessyoupreviouslyusedorheldtheassetsolelyforprivatepurposes.Forexample,foratoolsetboughton1Decemberatacostof$800(excludinginputtaxcreditentitlements)andusedforproducingassessableincomefromthatdateatanestimated70%ofthetime,theimmediatedeductionwouldbe$800 70%=$560.


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Calculation 2: STS pool deductionsTocalculateyourdeductionsforboththegeneralandlonglifeSTSpoolsyoumustfirstcalculatetheopeningpoolbalanceofeachpool.

IfyouareenteringtheSTS,allocateeachdepreciatingassetyouholdatthestartoftheincomeyeartotheappropriatepoolaccordingtotheasset’seffectivelife.Onlyincludethetaxablepurposeproportionoftheadjustablevalueofeachdepreciatingasset.Forexample,foranassetwithanadjustablevalueof$10,000thatisusedonly50%foranincome-producingpurpose,youwillonlyadd$5,000tothepool.

YoucanchoosenottoallocateanassettoyourlonglifeSTSpoolifyoufirstuseditorinstalleditreadyforuseforataxablepurposebefore1July2001.

YoucalculatetheopeningpoolbalanceforeachSTSpoolbyaddingthevalueofalldepreciatingassetsallocatedtotherelevantpool.

IfyouarecontinuingintheSTS,theopeningpoolbalanceofeachSTSpoolistheclosingpoolbalanceforthe2005–06incomeyear,exceptwhereyoumakeanadjustmenttoreflectthechangedbusinessuseofapooledasset.

CalculateyourdeductionforeachSTSpoolasfollows:

General STS pool deduction:

openingpoolbalance($) 30%

Long life STS pool deduction:

openingpoolbalance($) 5%

WherenecessarymakeareasonableapportionmentforeachSTSpooldeductionbetweenprimaryproductionandnon-primaryproductionactivities.

WritetheresultofyourgeneralSTSpooldeductionat(b)inworksheet4.

WritetheresultofyourlonglifeSTSpooldeductionat(c)inworksheet4.

Ifeitherpoolbalanceisbelow$1,000(aftertakingintoaccountadditionsanddisposalsbutbeforeworkingoutthedeductionsincalculations2and3),youworkoutthedeductionforthepoolusingcalculation5(b).

Calculation 3: Depreciating assets first used for a taxable purpose during 2006–07 and cost addition amounts for assets already allocated to a poolYoucalculateyourdeductionathalftherelevantpoolratefor:n depreciatingassetsthatyoufirstusedorinstalledready

foruseforataxablepurposeduringtheyear,andn costadditionamountsforassetsalreadyallocatedto

anSTSpool.

Calculateyourdeductionasfollows:n thetaxablepurposeproportionoftheadjustablevalueof

eachdepreciatingassetfirstusedforataxablepurposethisyearmultipliedby15%(generalSTSpoolassets)or2.5%(longlifepoolassets),plus

n thetaxablepurposeproportionofthecostadditionamountsmultipliedby15%(generalSTSpoolassets)or2.5%(longlifepoolassets).

WritethetotaldeductionforgeneralSTSpoolassetsat(d)andthetotaldeductionforlonglifeSTSpoolassetsat(e)inworksheet4.

Ifeitherpoolbalance(aftertakingintoaccountadditionsanddisposalsbutbeforecalculatingthedeductionsincalculations2and3)isbelow$1,000,workoutyourdeductionfortheseassetsusingcalculation5(b).

DEFINITIONSAdjustable valueofadepreciatingassetisitscost(excludinginputtaxcreditentitlements)lessitsdeclineinvaluesinceyoufirstuseditorinstalleditreadyforuseforanypurpose,includingaprivatepurpose.

Assessable balancing adjustment amountariseswheretheterminationvalueofthedepreciatingassetismorethantheadjustablevalue.

Cost addition amountsincludethecostofcapitalimprovementstoassetsandcostsreasonablyattributabletodisposingoforpermanentlyceasingtouseanasset(thismayincludeadvertisingandcommissioncostsorthecostsofdemolishingtheasset).

Decline in value(previously‘depreciation’)isthevaluethatanassetlosesoveritseffectivelife.

Deductible balancing adjustment amountariseswheretheterminationvalueofthedepreciatingassetislessthantheadjustablevalue.

Depreciating assetisanassetwithalimitedeffectivelifewhichdeclinesinvalueoverthatlife.

Taxable purposeincludesthepurposeofproducingassessableincome.

Taxable purpose proportionistheextenttowhichyouusetheassetforataxablepurpose,suchasforthepurposeofproducingassessableincome.

Termination valueincludesmoneyreceivedfromthesaleofanassetorinsurancemoneyreceivedastheresultofthelossordestructionofanasset.ExcludetheGSTcomponentwheretheamountreceivedisforataxablesupply.


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Calculation 4: Other depreciating assetsWorkoutyourdeductionforthedeclineinvalueofallyourotherdepreciatingassetsthatarenotincludedincalculations1to3.

SeetheGuide to depreciating assets 2007forinformationonhowtocalculatethedeclineinvalueoftheseassets.Tofindouthowtogetthispublication,seetheinsidebackcover.

Writeyourtotaldeductionforotherdepreciatingassetsat(f)inworksheet4.

Donotincludeat(f)intheworksheetdepreciatingassetswhichqualifyforadeductionunderSubdivision40-For40-GoftheITAA1997aswaterfacilitiesorlandcareoperationsinyourprimaryproductionbusinessandforwhichyouhavechosentoclaimadeductionunderthoseSubdivisionsandnottheSTSrules.ShowthesedeductionsatW Landcare operations and business deduction for decline in value of water facilityitemP8 Reconciliation items.

Calculation 5: Disposal of depreciating assets

(a) Low-cost assetsIfyouhavedisposedofalow-costassetforwhichyouhaveclaimedanimmediatedeductionincalculation1thisyearorinaprioryear,includethetaxablepurposeproportionoftheterminationvalueintheReconciliation itemssectionofitemP8.Forexample,foralow-costassetusedonly50%foranincome-producingpurposewhichwassoldfor$200(excludingGST),only$100willbeassessableandincludedasareconciliationadjustment.

(b) Assets allocated to STS poolsWhereyoudisposeofdepreciatingassetsthathavebeenallocatedtoeitherthegeneralorlonglifeSTSpools,youdeductthetaxablepurposeproportionoftheterminationvaluefromtheclosingpoolbalance.Forexample,forapooleddepreciatingassetusedonly50%foranincome-producingpurposewhichwassoldfor$3,000(excludingGST),only$1,500willbedeductedfromtheclosingpoolbalance.Ifthebalanceofapoolisbelow$1,000butgreaterthanzero(aftertakingintoaccountanyadditionsanddisposalsbutbeforecalculatingthedeductionsincalculations2and3)youcanclaimanimmediatedeductionforthisamount.Writethisdeductionagainsttheappropriatepoolat(b)or(c)inworksheet4.

Iftheclosingpoolbalanceislessthanzero,youincludetheamountbelowzeroinyourassessableincomeintheReconciliation itemssectionofitemP8.Formoreinformationaboutclosingpoolbalances,seebelow.

Ifexpensesareincurredindisposingofadepreciatingasset,theseexpensesmaybetakenintoaccountincalculation3.

(c) Other depreciating assets

SeetheGuide to depreciating assets 2007forinformationonhowtocalculateanybalancingadjustmentamountsonthedisposalofotherdepreciatingassets.BalancingadjustmentamountsareincludedintheReconciliation itemssectionofitemP8.SeeWhat are income reconciliation adjustments?andWhat are expense reconciliation adjustments?onpage37.

closing pool balanceTheclosingbalanceofeachSTSpoolforanincomeyearis:n theopeningpoolbalance(seecalculation2),plusn thetaxablepurposeproportionoftheadjustablevalueof

assetsthatwerefirstusedorinstalledreadyforuseforataxablepurposeduringtheyear(seecalculation3),plus

n thetaxablepurposeproportionofanycostadditionamountsforassetsinthepoolduringtheyear(seecalculation3),less

n thetaxablepurposeproportionoftheterminationvalueofanypooledassetsdisposedofduringtheyear[seecalculation5(b)],less

n theSTSpooldeduction(seecalculation2),lessn thedeductionforassetsfirstusedbyyouduringthe

year(seecalculation3),lessn thedeductionforanycostadditionamountsfor

pooledassetsduringtheyear(seecalculation3).

Ifyourclosingpoolbalanceislessthanzero,seecalculation5(b).

Theclosingpoolbalanceforthisyearbecomestheopeningpoolbalanceforthe2007–08incomeyearexceptwhereyoumadeanadjustmenttoreflectthechangedbusinessuseofapooledasset.

Youwillneedyouropeningpoolbalancetoworkoutthepooldeductionnextyear.Donotwriteyourclosingpoolbalanceonyourtaxreturn(supplementarysection).


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WORKsheet 4: Depreciation deductions for STS

Primary production ($)

Non-primary production ($)

Total ($)

Low-costassets (a)

Generalpool (b)

Longlifepool (c)

Generalpool(1/2rate) (d)

Longlifepool(1/2rate) (e)

Otherassets (f)

DepreciationexpensesAdd(a),(b),(c),(d),(e)and(f). (g)


STEP 1WriteyourtotalprimaryproductiondepreciationdeductionsatDepreciation expensesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

STEP 2Writeyourtotalnon-primaryproductiondepreciationdeductionsatDepreciation expensesintheNon-primaryproductioncolumn.Donotshowcents.

NOTEDonotshowanyamountincludedatpartBofitemP1.

STEP 3Transfertheamountat(g)inworksheet4tom Depreciation expenses.Donotshowcents.

STEP 4Transfertheamountat(a)inworksheet4to A itemP10STS depreciating assetsonpage4ofyourschedule.Donotshowcents.

STEP 5Adduptheamountsat(b)and(d)inworksheet4andwritethetotalat B itemP10.Donotshowcents.

STEP 6Adduptheamountsat(c)and(e)inworksheet4andwritethetotalatc itemP10.Donotshowcents.

STEP 7GotoMotor vehicle expensesonpage29.

OtheR BusInessesYou need to knowYoushowatm Depreciation expensesitemP8thedepreciationclaimedinyourbooksofaccountotherthanforthoseassetsallocatedinaprioryeartoageneralSTSpooloralonglifeSTSpool.Forassetsallocatedtosuchapool,includeheretheamountofthepooldeductiontobeclaimedfortaxpurposes.ForinformationaboutSTScapitalallowances(depreciation)deductions,seepage25.

Thedepreciationamountshownatm shouldnotincludeprofitorlossonthesaleofdepreciatingassets.YoushouldincludeprofitsonthesaleofdepreciatingassetsinOther business incomeat I or J intheIncomesectionofitemP8onyourschedule.Youshouldincludelossesonthesaleofdepreciatingassetsat P All other expensesintheExpensessection.

Accountingorbookdepreciationmaydifferfromthedeductionforthedeclineinvalueofdepreciatingassets.

Youcarryoutthereconciliationbetweenaccountingdepreciationandthedeductionfordeclineinvalueath Expense reconciliation adjustmentsintheReconciliation items sectionofitemP8.

YoucanusethedeclineinvaluecalculatoronourwebsitetocalculatethedeclineinvalueoftheseassetsorseetheGuide to depreciating assets 2007formoreinformationonhowtocalculatedeclineinvalue.

ISEXPENDITUREREVENUEORCAPITALINNATURE?

Law Administration Practice Statement PS LA 2003/8 – Taxation treatment of expenditure on low cost items for taxpayers carrying on a businessprovidesguidanceontwostraightforwardmethodswhichcanbeusedbytaxpayerscarryingonabusinesstohelpdeterminewhetherexpenditureincurredtoacquirecertainlow-costitemsistobetreatedasrevenueexpenditureorcapitalexpenditure.Subjecttocertainqualifications,thetwomethodscoverexpenditurebelowathresholdandtheuseofstatisticalsamplingtoestimatetotalrevenueexpenditureonlow-costitems.Thethresholdruleallowsanimmediatedeductionforqualifyinglow-costbusinessitemscosting$100orless.Thesamplingruleallowstaxpayerswithalow-valuepooltousestatisticalsamplingtodeterminetheproportionofthetotalpurchasesonqualifyinglow-costbusinessitemsthatarerevenueexpenditure.Adeductionforexpenditureincurredonlow-costassetscalculatedinaccordancewiththisPracticeStatementwillbeacceptedbytheTaxOffice.


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steP 1WriteyourtotalprimaryproductiondepreciationexpensesatDepreciation expensesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductiondepreciationexpensesatDepreciation expensesintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductiondepreciationexpensesandwritethetotalatm .

Is the amount atm greater than $15,000?

NO Gotostep4.

YES YouwillneedtocompleteandattachaCapital allowances schedule 2007unlessyou:n havechosentoenterorcontinueintheSTS

atitemS1,orn areexitingtheSTSatitemS1orhavepreviously

exitedtheSTS,andtheamountatm relatesentirelytoSTSdepreciatingassets.

Formoreinformation,seetheCapital allowances schedule instructions 2007(NAT4089–6.2007).

steP 4IfyouareexitingtheSTSorhavepreviouslyexitedtheSTS,andarecontinuingtoclaimadeductioninrespectofapriorSTSpoolatm Depreciation expenses,printintheCODEboxatm theappropriatecodefromtable2.

InallothercasesleavetheCODEboxblank.

tABle 2

Type of depreciation expense Code

Theamountatm relatesentirelytoSTSdepreciatingassets.DonotcompleteaCapital allowances schedule 2007.

S

Theamountatm relatestobothSTSdepreciatingassetsandtoUCAitems.YouwillneedtocompleteandattachaCapital allowances schedule 2007ifthetotalamountatm exceeds$15,000.

M

mOtOR vehIcle eXPenses

Did you have motor vehicle expenses in your business?

NO GotoRepairs and maintenanceonpage30.

YES Readon.

You need to knowQuestionsD1andD2inTaxPack 2007tellyoumoreabouttheexpensesyoucanclaim.

Donotincludedepreciation,financeleasingchargesorinterestpaid.Youshouldincludetheseatm Depreciation expenses, J Lease expenses,Q Interest expenses within Australiaor R Interest expenses overseasitemP8onyourschedule.


steP 1WriteyourtotalprimaryproductionmotorvehicleexpensesatMotor vehicle expensesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductionmotorvehicleexpensesatMotor vehicle expensesintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductionmotorvehicleexpensesandwritethetotalatn itemP8onyourschedule.

steP 4IfyouworkedouttheamountyouareclaimingformotorvehicleexpensesusingoneofthefourmethodsdescribedinquestionD1inTaxPack 2007,findthecodeletterthatidentifiesthemethodyouusedandprintitintheTYPEboxattherightoftheamountatn .

Ifyouareclaimingmotorvehicleexpensesotherthanforacar–seequestionD2inTaxPack 2007–printthecodeletterNintheTYPEboxattherightoftheamountatn .

Ifyouhavemorethanonecode,printthecodethatappliestothelargestclaim.


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RePAIRs And mAIntenAnce

Did you have repairs and maintenance as a business expense?

NO GotoAll other expensesinthenextcolumn.

YES Readon.

You need to knowThisisexpenditureshowninyouraccountsforrepairsandmaintenanceofpremises,plant,machinery,implements,utensils,rollingstockorarticlesassociatedwiththeproductionofincome.Anynon-deductibleexpenditure,suchasitemsofacapitalnatureoramountsrelatingtoprivateuseofanitem,includedatthisquestion,shouldalsobeincludedath Expense reconciliation adjustmentsintheReconciliation itemssectionitemP8onyourschedule.Thefollowinginformationondeductionsforrepairswillassistyoutoworkoutwhetheryouneedtomakeanexpensereconciliationadjustment.

RepairsYoumaydeductthecostofrepairs–notbeingexpenditureofacapitalnature–topremisesanddepreciatingassetssuchasplant,machineryorequipmentusedsolelyforproducingassessableincome,orincarryingonabusinessforthatpurpose.

Expenditureonrepairstopropertyusedpartiallyforbusinessorincome-producingpurposes–forexample,wherethepropertyisalsousedforprivatepurposesorintheproductionofexemptincome–isdeductibleonlytotheextentthatisreasonable,takingaccountofsuchuse.

Whereitemsarenewlyacquired,includingbywayofalegacyorgift,thecostofrepairstodefectsinexistenceatthetimeofacquisitionisgenerallyofacapitalnature.

Expenditureincurredinmakingalterations,additionsorimprovementsisofacapitalnatureandisnotdeductible.

Forfurtherinformationondeductionsforrepairs,seeTaxation Ruling TR 97/23 – Income tax: deductions for repairs.

Records you need to keepTosupportyourclaimforthecostofrepairs,youmustkeepfulldetails,includingsourcedocuments,ofthenatureandcostofrepairstoeachitem.


steP 1WriteyourtotalprimaryproductionrepairsandmaintenanceexpensesatRepairs and maintenanceinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductionrepairsandmaintenanceexpensesatRepairs and maintenanceintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductionrepairsandmaintenanceexpensesandwritethetotalatO .

All OtheR eXPenses

Did you have any other business expenses?

NO GotoTotal expenses onpage31.

YES Readon.

You need to knowThisisthetotalofallotherexpenseswhichyouincurredinderivingyourprofitorlossandwhichyouhavenotalreadyshownelsewhereatitemP8.Otherexpensesincludewages,accountingandprofessionalfees,advertising,officesupplies,foreignexchange(forex)lossesandanylossonthesaleofadepreciatingassetasshowninyouraccounts.

Formoreinformationaboutforexlosses,visitourwebsiteorseequestionD15inTaxPack 2007 supplement.

Youshouldalsoincludecapitalandothernon-deductibleitems(includingdebtdeductionsdeniedbythincapitalisationrules)shownhereath Expense reconciliation adjustmentsintheReconciliation itemssectionofitemP8onyourschedule.SeeIncome and expense reconciliation adjustmentsonpage36formoreinformation.

Formoreinformationonthincapitalisation,seepage17.

home office expensesIfpartofyourhomewasspecificallysetasideasyourplaceofbusinessandusedsolelyforthepurposeofconductingyourbusinessaffairsandyouhadnootherplacefromwheretheyweremainlycarriedon,thefollowingexpensesarepartlydeductible:n occupancyexpenses–includingrent,mortgageinterest,

rates,andhouseandcontentsinsurancen runningexpenses–includingelectricity,cleaning,

depreciation,leasingchargesandrepairstofurnitureandfurnishingsintheoffice.

Inmostcases,youcanapportionexpensesonafloorareabasisand,iftheareaofyourhomewasaplaceofbusinessforonlypartoftheyear,onatimebasis.

Whereyouusedpartofyourhomeasahomeofficebutitdidnotqualifyasaplaceofbusiness,onlytheadditionalrunningexpensesyouincurredmaybedeductible.

Forfurtherdetails,seeTaxation Ruling TR 93/30 – Income tax: deductions for home office expensesandLaw Administration Practice Statement PS LA 2001/6 – Home office expenses: diaries of use and calculation of home office expenses.


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Records you need to keepYoushouldkeeprecordstoshowhowyouhavecalculatedyourhomeofficeexpenses.TheTaxOfficemayaskyoufortheseatalaterdate.


steP 1Writeyourtotal‘other’primaryproductionexpensesatAll other expensesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotal‘other’non-primaryproductionexpensesatAll other expensesintheNon-primaryproductioncolumn.

steP 3Addupyour‘other’primaryproductionand‘other’non-primaryproductionexpensesandwritethetotalat P itemP8onyourschedule.

tOtAl eXPenses


steP 1AddupalltheexpensesyouhavewritteninthePrimaryproductioncolumn,fromCost of salesdowntoandincludingAll other expenses.Writethetotalat s itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Ifyourtotalofprimaryproductionexpensesisanegativeamount,printLintheboxattherightoftheamountat s .

steP 3AddupalltheexpensesyouhavewrittenintheNon-primaryproductioncolumn,fromCost of salesdowntoandincludingAll other expenses.Writethetotalat t .Donotshowcents.

steP 4Ifyourtotalofnon-primaryproductionexpensesisanegativeamount,printLintheboxattherightoftheamountat t .

steP 5Addupyourprimaryproductionandnon-primaryproductionexpenses.WritethetotalatTOTAL EXPENSESintheTotalscolumn.

steP 6Ifyourtotalexpensesisanegativeamount,printLintheboxattherightofthisamount.

RecOncIlIAtIOn Items

Considertheitemsonpages31–6toseewhetheryouqualifyforadeduction.

AnyadjustmentstoyourincomeandexpenseamountsaredealtwithatIncome and expense reconciliation adjustmentsonpage36.

deductIOn FOR envIROnmentAl PROtectIOn eXPenses

Did you have a business expense for environmental protection activities?

NO GotoSection 40-880 deductiononpage32.

YES Readon.

You need to knowShowheretheamountofallowableexpenditureonenvironmentalprotectionactivities(EPA).

YoucandeductexpendituretotheextentthatyouincuritforthesoleordominantpurposeofcarryingonEPA.EPAareactivitiesundertakentoprevent,fightorremedypollution,ortotreat,cleanup,removeorstorewastefromyourearningactivity.Yourearningactivityisoneyoucarriedon,carryonorproposetocarryonforthepurposeof:n producingassessableincome(otherthananet

capitalgain)n explorationorprospecting,orn miningsiterehabilitation.

Youmayalsoclaimadeductionforcleaningupasiteonwhichapredecessorcarriedonsubstantiallythesamebusinessactivity.

Thedeductionisnotavailablefor:n EPAbondsandsecuritydepositsn expenditureforacquiringlandn expenditureforconstructingoralteringbuildings,

structuresorstructuralimprovements,orn expendituretotheextentthatyoucandeductan

amountforitunderanotherprovision.

Accordingly,expenditurewhichformspartofthecostofadepreciatingassetisnotdeductibleasexpenditureonEPAifadeductionisavailableforthedeclineinvalueoftheasset.SeetheGuide to depreciating assets 2007forinformationonthedeductionfordeclineinvalue.

Expenditureincurredonorafter19August1992oncertainearthworksconstructedasaresultofcarryingoutEPAcanbewrittenoffattherateof2.5%perannumundertheprovisionsforcapitalworksexpenditure.

ExpenditureonanenvironmentalassessmentofaprojectisnotdeductibleasexpenditureonEPA.Ifitiscapitalexpendituredirectlyconnectedwithaproject,itcouldbeaprojectamountforwhichadeductionwouldbeavailable


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overtheprojectlife–seeBusiness deduction for project poolonpage33.Anexamplewouldbeastudytodeterminethequantityandtypeofpollutantswhichwillbeproducedfromaprocessusedinaproposedbusiness.

Ifthedeductionarisesfromanon-arm’slengthtransactionandtheexpenditureismorethanthemarketvalueofwhatitwasfor,theamountoftheexpenditureisinsteadtakentobethatmarketvalue.

Anyrecoupmentoftheexpenditurewouldbeassessableincome.


steP 1WriteyourtotalprimaryproductionEPAexpensesatDeduction for environmental protection expensesinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductionEPAexpensesat Deduction for environmental protection expensesintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductionEPAexpensesandwritethetotalat v .

sectIOn 40-880 deductIOn

Can you deduct business-related costs under section 40-880?

NO GotoBusiness deduction for project pool onpage33.

YES Readon.

You need to knowSection40-880providesafive-yearwrite-offforcertaincapitalexpenditureincurredbyyouinrelationtoapast,presentorprospectivebusinessiftheexpenditureisnotalreadytakenintoaccountornotdeniedadeductionbyanotherprovision.

Forexpenditureincurredbefore1July2005,therearesevenspecifictypesofbusiness-relatedcapitalexpenditureforwhichyoumaybeabletoclaimadeduction.Forexpenditureincurredonorafter1July2005,thelawhasbeenchangedsothatadeductioncannowalsobeclaimedforcapitalexpenditure:n inrelationtoyourbusinessn inrelationtoabusinessthatusedtobecarriedon

–suchascapitalexpensesincurredinordertoceasethebusiness

n inrelationtoabusinessproposedtobecarriedon–suchasthecostsoffeasibilitystudies,marketresearchorsettingupthebusinessentity

n asashareholder,beneficiaryorpartnertoliquidateorderegisteracompanyortowindupatrustorpartnership–thecompany,trustorpartnershipmusthavecarriedonabusiness.

Ifyouincurexpenditureinrelationtoyourexistingbusiness,abusinessthatyouusedtocarryonorabusinessthatyouproposetocarryon,theexpenditureisdeductibletotheextentthebusinessis,wasorisproposedtobecarriedonforataxablepurpose.

Youcannotdeductexpenditureinrelationtoanexistingbusinessthatiscarriedonbyanotherentity.However,youcandeductexpenditureyouincurinrelationtoabusinessthatusedto,orisproposedto,becarriedonbyanotherentity.Theexpenditureisonlydeductibletotheextentthat:n thebusinesswas,orisproposedtobe,carriedonfora

taxablepurpose,andn theexpenditureisinconnectionwiththebusinessthat

wasorisproposedtobecarriedonandwithyourderivingassessableincomefromthebusiness.

Generally,youcandeduct20%oftheexpenditureintheyearyouincuritandineachofthefollowingfouryears.However,forsomepre-andpost-businessexpenditureyoumayhavetodeferyourclaimforadeductionbecausethenon-commercialrulesapply.

Forexample,ifyouwerecarryingonabusinessduringtheyearbutyourrelevantcapitalexpenditurerelatestoanewbusinessthatdidnotcommencebefore30June2007,yougenerallycannotclaimadeductionfortheexpensesincurredonorafter1July2005untilthebusinessactivitycommences.Ifyouincursuchexpenditureinthesecircumstancesyoushouldnotclaimthedeductibleamount(20%)butnoteitinyourbusinessortaxationrecordsandclaimalltheamountsdeferredforthisitemintheyearthebusinesscommences.

NOTEThedeductioncannotbeclaimedforcapitalexpendituretotheextenttowhichit:n canbedeductedunderanotherprovisionn formspartofthecostofadepreciatingassetyou

hold,usedtoholdorwillholdn formspartofthecostoflandn relatestoaleaseorotherlegalorequitablerightn wouldbetakenintoaccountinworkingoutan

assessableprofitordeductiblelossn wouldbetakenintoaccountinworkingoutacapital

gainoracapitallossn wouldbespecificallynotdeductibleundertheincome

taxlawsiftheexpenditurewasnotcapitalexpendituren isspecificallynotdeductibleundertheincometax

lawsforareasonotherthantheexpenditureiscapitalexpenditure

n isofaprivateordomesticnaturen isincurredinrelationtogainingorproducingexempt

incomeornon-assessablenon-exemptincomen isexcludedfromthecostorcostbaseofanasset

because,underspecialrulesintheUCAorcapitalgainstaxregimesrespectively,thecostorcostbaseoftheassetwastakentobethemarketvalue

n isareturnoforoncapitalorisareturnofanon-assessableamount(forexample,repaymentsofloanprincipal).


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Claimtheamountdeductibleundersection40-880hereifyoucarriedonabusinessasanindividualatanytimeduringtheyear.Ifyoustoppedcarryingonabusinessasanindividualinanincomeyearthatendedbefore1July2005andyouhavenotfullyclaimedyourfive-yearwrite-offundersection40-880,claimtheamountdeductiblethisyearatitemD15onyourtaxreturn(supplementarysection).

Ifyouhaveincurredrelevantcapitalexpensesonorafter1July2005andtheexpensesrelatetoabusinessthatceasedinapreviousincomeyearandyoucarriedonthebusinessasasoletraderorthroughapartnership,claimtheexpenseshere.Ifyoucarriedonthebusinessthroughacompanyortrust,youclaimtheamountdeductible(20%)atitemD15onyourtaxreturn(supplementarysection).

Youmustshowanyrecoupmentoftheexpenditureasassessableincome,eitheratOther business income oraspartofyourIncome reconciliation adjustments intheReconciliation items section ofitemP8 onyourschedule.


STEP 1Writeyourdeductionforprimaryproductionbusiness-relatedcostsatSection 40-880 deduction inthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

STEP 2Writeyourdeductionfornon-primaryproductionbusiness-relatedcostsatSection 40-880 deduction intheNon-primaryproductioncolumn.Donotshowcents.

STEP 3Addupyourprimaryproductionandnon-primaryproductiondeductionsforbusiness-relatedcostsandwritethetotalat A .

BusIness deductIOn FOR PROJect POOl

Did you have capital expenditure directly connected with a business project?

NO GotoLandcare operations and business deduction for decline in value of water facilityonpage35.

YES Readon.

You need to knowCertaincapitalexpenditureyouincurredafter30June2001whichisdirectlyconnectedwithaprojectyoucarryonorproposetocarryonforataxablepurposecanbeallocatedtoaprojectpoolandwrittenoffoverthelifeoftheproject.Eachprojecthasaseparateprojectpool.Theprojectmustbeofsufficientsubstanceandbesufficientlyidentifiedthatitcanbeshownthatthecapitalexpendituresaidtobea‘projectamount’isdirectlyconnectedwiththeproject.

Aprojectiscarriedonifitinvolvesacontinuityofactivityandactiveparticipation.Merelyholdingapassiveinvestmentsuchasarentalpropertywouldnotberegardedascarryingonaproject.

Suchcapitalexpenditure,knownasaprojectamount,isexpenditureincurredon:n creatingorupgradingcommunityinfrastructure

foracommunityassociatedwiththeproject–thisexpendituremustbepaid(notjustincurred)tobeaprojectamount

n sitepreparationfordepreciatingassets(otherthantodrainswamporlow-lyinglandortoclearlandforhorticulturalplantsandgrapevines)

n feasibilitystudiesfortheprojectn environmentalassessmentsfortheprojectn obtaininginformationassociatedwiththeprojectn seekingtoobtainarighttointellectualproperty,orn ornamentaltreesorshrubs.

Projectamountsalsoincludeminingcapitalexpenditureandexpenditureoncertainfacilitiesusedtotransportmineralsorquarrymaterials.Formoreinformationontheseprojectamounts,seetheGuide to depreciating assets 2007.

Theexpendituremustnotbeotherwisedeductibleorformpartofthecostofadepreciatingasset.Iftheexpenditureincurredarisesfromanon-arm’slengthdealingandismorethanthemarketvalueofwhatitwasfor,theamountoftheexpenditureistakentobethatmarketvalue.

Projectamountsareallocatedtoa‘projectpool’.Yourdeductionforprojectamountsallocatedtoaprojectpoolisspreadoverthe‘projectlife’.Theprojectlifeistheperiodfromwhentheprojectstartstooperateuntilwhenitstopsoperating.Theperiodmustbelimitedbysomethinginherentintheproject.Adeductionforprojectamountswouldbeavailableoverthatlimitedprojectlife(oranearlierabandonment,saleorotherdisposal).Ifthereisnolimitedprojectlife,nodeductionisavailableundertheserules.

Adeductionisavailablestartingfromtheincomeyearifyoustartedtooperateaprojectinthatyeartogainorproduceassessableincome.Thedeductionisworkedoutonthevalueoftheprojectpoolattheendoftheincomeyear.Forprojectsthatstartedtooperateonorafter10May2006,thecalculationofthedeductionhaschanged.Youcannotusethehigherrateifyouabandon,sellorotherwisedisposeofanexistingprojectandthenrestartitonorafter10May2006justsodeductionscanbecalculatedusingthehigherrate.


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Useworksheet5Aor5Btoworkoutyourdeduction.Forprojectswhichstartedtooperateonorafter10May2006thecalculationisasfollows:

WORKsheet 5A: Project pool deduction for projects which started on or after 10 May 2006

Valueofprojectpoolat30June2007.Thisistheclosingpoolvalueforthe2005–06incomeyear(ifany)plusthesumoftheprojectamountsyouallocatedtothepoolin2006–07. (a) $

Yourestimateofthelifeoftheproject(inyears) (b) years

Divide(a)by(b). (c) $

Multiply(c)by200%–thisisyour2006–07deductionforprojectpool. (d) $

Note:Yourdeductionat(d)mustnotbemorethantheamountat(a).Ifaprojectoperatedin2006–07forpurposesotherthanearningassessablebusinessincome,youmustreduceyourdeductionat(d)byareasonableamountfortheextenttowhichtheprojectoperatedforsuchpurposes.

WORKsheet 5B: Project pool deduction for projects which started before 10 May 2006

Valueofprojectpoolat30June2007.Thisistheclosingpoolvalueforthe2005–06incomeyear(ifany)plusthesumoftheprojectamountsyouallocatedtothepoolin2006–07. (a) $

Yourestimateofthelifeoftheproject(inyears) (b) years

Divide(a)by(b). (c) $

Multiply(c)by150%–thisisyour2006–07deductionforprojectpool. (d) $

Note: Yourdeductionat(d)mustnotbemorethantheamountat(a).Ifaprojectoperatedin2006–07forpurposesotherthanearningassessablebusinessincome,youmustreduceyourdeductionat(d)byareasonableamountfortheextenttowhichtheprojectoperatedforsuchpurposes.

Thepoolvaluecanbesubjecttoadjustments.Anadjustmentcouldhappenunderspecificrulesthatapplytotransactionsconductedinforeigncurrency(theforeignexchange,orforex,rules).Ifduringtheincomeyearyoumetanobligationtopayforeigncurrencyincurredasaprojectamountwhichyouallocatedtoaprojectpool,youmighthavederivedagainorincurredalossundertheserules.Formoreinformationabouttheforexrules,visitourwebsite.

CLOSINGPOOLVALUEFOR2006–07Thisis(a)minus(d)inworksheets5Aand5B.Youwillneedtheclosingpoolvaluefor2006–07toworkoutyourdeductionfortheprojectpoolnextyear.

AnyrecoupmentoftheexpendituremustbeshownasassessableincomeeitheratOther business incomeoraspartofyourIncome reconciliation adjustmentsintheReconciliation itemssectionofitemP8onyourschedule.

Where a project was abandoned, sold or otherwise disposed of in 2006–07Inthiscase–whetherornottheprojecthadbeguntooperate–youcanclaimadeductionforthe2005–06closingpoolvalue(ifany)plusanyprojectamountsallocatedtothepoolinthe2006–07year.Youmustshowanyproceedsfromtheabandonment,saleordisposaloftheprojectasassessableincomeeitheratOther business incomeoraspartofyourIncome reconciliation adjustmentsintheReconciliation itemssectionofyourschedule.


steP 1WriteyourtotalprimaryproductionprojectpoolbusinessdeductionatBusiness deduction for project poolinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotalnon-primaryproductionprojectpoolbusinessdeductionatBusiness deduction for project poolintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductionprojectpoolbusinessdeductionsandwritethetotalat l .

Is the amount at l greater than $1,000?

NO GotoLandcare operations and business deduction for decline in value of water facility onpage35.

YES YouwillneedtocompleteandattachaCapital allowances schedule 2007(unlessyouareanSTStaxpayer).

Formoreinformation,seethe Capital allowances schedule instructions 2007.Thispublicationisavailableonourwebsiteortofindouthowtogetaprintedcopy,seetheinsidebackcover.


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lAndcARe OPeRAtIOns And BusIness deductIOn FOR declIne In vAlue OF WAteR FAcIlItY

Did you have landcare operations and/or water conservation/conveying expenses?

NO GotoIncome and expense reconciliation adjustmentsonpage36.

YES Readon.

You need to know

landcare operations expensesYoucanclaimadeductionforcapitalexpenditureyouincuronalandcareoperationforlandinAustraliaintheyearitisincurred.

Unlessyouarearurallandirrigationwaterprovider,thedeductionisavailabletotheextentyouusethelandforeither:n aprimaryproductionbusiness,orn inthecaseofruralland,abusinessforthepurpose

ofproducingassessableincomefromtheuseofthatland–exceptabusinessofminingorquarrying.

Youmayclaimthedeductionevenifyouareonlyalesseeoftheland.

Rurallandirrigationwaterproviderscanclaimadeductionforcertainexpendituretheyincur.ArurallandirrigationwaterproviderisanentitywhosebusinessisprimarilyandprincipallysupplyingwatertoentitiesforuseinprimaryproductionbusinessesonlandinAustraliaorbusinesses(exceptminingorquarryingbusinesses)usingrurallandinAustralia.Thesupplyofwaterbyusingamotorvehicleisexcluded.

Ifyouarearurallandirrigationwaterprovider,youcanclaimadeductionforcapitalexpenditureyouincurredsupplyingwatertoalandcareoperationon:n landinAustraliabeingusedforprimaryproduction

businesses,orn rurallandinAustraliabeingusedforataxablepurpose

(exceptabusinessofminingorquarrying)

Yourdeductionisreducedbyareasonableamounttoreflectanentity'suseofthelandforotherthanataxablepurposeafteryouincurredtheexpenditure.

Alandcareoperationisoneofthefollowing:n erectingfencestoseparatedifferentlandclassesin

accordancewithanapprovedlandmanagementplann erectingfencesprimarilyandprincipallytokeepanimals

outofareasaffectedbylanddegradationinordertopreventorlimitfurtherdamageandassistinreclaimingtheareas

n constructingaleveeorsimilarimprovementsn constructingdrainageworks–otherthanthedraining

ofswampsorlow-lyingland–primarilyandprincipallytocontrolsalinityorassistindrainagecontrol

n anoperationprimarilyandprincipallyforeradicatingorexterminatinganimalpestsfromtheland

n anoperationprimarilyandprincipallyforeradicating,exterminatingordestroyingplantgrowthdetrimentaltotheland

n anoperationprimarilyandprincipallyforpreventingorcombatinglanddegradationotherthanbytheuseoffences,or

n anextension,alterationoradditiontoanyoftheassetsdescribedinthefirstfourdotpointsoranextensionofanoperationdescribedinthefifthtoseventhdotpoints.

Alandcareoperationalsoincludesexpenditurefor:n arepairofacapitalnaturetoanassetwhichis

deductibleunderalandcareoperationn constructingastructuralimprovementthatisreasonably

incidentaltoleveesordrainageworksdeductibleunderalandcareoperation

n arepairofacapitalnature,oranalteration,additionorextensiontoastructuralimprovementthatisreasonablyincidentaltolevees(orsimilarimprovements)ordrainageworksdeductibleunderalandcareoperation.

Anexampleofastructuralimprovementthatmaybereasonablyincidentaltodrainageworksisafenceconstructedtopreventlivestockenteringadrainthatwasconstructedtocontrolsalinity.

Nodeductionisavailableifthecapitalexpenditureisonplantunlessitisoncertainfences,damsorotherstructuralimprovements.Wherealeveeisconstructedprimarilyandprincipallyforwaterconservation,itwouldbeawaterfacilityandnodeductionwouldbeallowableundertheserules.Itsdeclineinvaluewouldneedtobeworkedoutundertherulesforwaterfacilities.SeeWater conservation and conveyance facilities.

YoumayneedtoshowanyrecoupmentoftheexpenditureasassessableincomeeitheratOther business incomeintheIncomesectionofitemP8onyourscheduleoraspartofyourIncome reconciliation adjustmentsintheReconciliation itemssectionofitemP8.PhonetheBusinessInfoline(seetheinsidebackcover).

Thesedeductionsarenotavailabletoapartnership.Expensesforlandcareoperationsincurredbyapartnershipareallocatedtoeachpartnerwhocanthenclaimtherelevantdeductioninrespectoftheirshareoftheexpenditure.

Water conservation and conveyance facilitiesYoucanclaimadeductionforthedeclineinvalueofawaterfacility.Awaterfacilityincludesplantorastructuralimprovement,oranalteration,additionorextensiontoplantorastructuralimprovement,thatisprimarilyorprincipallyforthepurposeofconservingorconveyingwater.TheexpendituremustbeincurredprimarilyandprincipallyforconservingorconveyingwaterforuseinaprimaryproductionbusinessonlandinAustralia.


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‘Waterfacility’includesdams,tankstands,bores,wells,irrigationchannelspipes,pumps,watertowersandwindmills.Waterfacilityalsoincludescertainotherexpenditureincurredonorafter1July2004for:n arepairofacapitalnaturetoplantorastructural

improvementthatisprimarilyorprincipallyforthepurposeofconservingorconveyingwater–forexample,ifyoupurchaseapumpthatneedssubstantialworkdonetoitbeforeitcanbeusedinyourbusiness,thecostofrepairingthepumpmaybetreatedasawaterfacility

n astructuralimprovement,oranalteration,additionorextensiontoastructuralimprovement,thatisreasonablyincidentaltoconservingorconveyingwater

n arepairofacapitalnaturetoastructuralimprovementthatisreasonablyincidentaltoconservingorconveyingwater.

Examplesofstructuralimprovementsthatarereasonablyincidentaltoconservingorconveyingwaterincludeabridgeoveranirrigationchannel,aculvert(alengthofpipeormultiplepipesthatarelaidunderaroadtoallowtheflowofwaterinachanneltopassundertheroad),orafencepreventinglivestockenteringanirrigationchannel.Adeductionforthedeclineinvalueofawaterfacilitycanbeclaimedinequalinstalmentsoverthreeyears.Unlessyouareanirrigationwaterprovider,theexpendituremustbeincurredprimarilyandprincipallyforconservingorconveyingwaterforuseinaprimaryproductionbusinessyouconductonlandinAustralia.Youmayclaimthedeductionevenwhenyoudonotowntheland.Therefore,ifyouarealesseecarryingonabusinessofprimaryproductionontheland,youcanstillclaimthededuction.Yourdeductionisreducedwherethefacilityisnotwhollyusedforeither:n carryingonaprimaryproductionbusinessonlandin

Australia,orn ataxablepurpose–forexample,producingassessable

income.

Irrigationwaterprovidersareentitledtoadeductionforwaterfacilitiesexpenditureincurredonorafter1July2004.AnirrigationwaterproviderisanentitywhosebusinessisprimarilyandprincipallythesupplyofwatertoentitiesforuseinprimaryproductionbusinessesonlandinAustralia.Thesupplyofwaterbyusingamotorvehicleisexcluded.

Ifyouareanirrigationwaterprovider,youmustincurtheexpenditureprimarilyandprincipallyforthepurposeofconservingorconveyingwaterforuseinprimaryproductionbusinessesconductedbyotherentitiesonlandinAustralia–beingentitiessuppliedwithwaterbyyou.Thedeductionisreducedifthefacilityisnotusedwhollyforataxablepurpose.Anyrecoupmentoftheexpendituremaybeassessableincome.PhonetheBusinessInfoline(seetheinsidebackcover).

Thesedeductionsarenotavailabletoapartnership.Costsincurredbyapartnershipforfacilitiestoconserveorconveywaterareallocatedtoeachpartnerwhocanthenclaimtherelevantdeductioninrespectoftheirshareoftheexpenditure.

STSTAXPAYERSTheamountyoushowatW mustnotincludeanyamountrelatingtoadepreciatingassetusedinyourprimaryproductionbusinessifyouhavechosentoclaimadeductionforitundertheSTScapitalallowances(depreciation)rules.


steP 1WriteyourtotaldeductionsforprimaryproductionlandcareoperationsexpensesandforwaterfacilitiesatLandcare operations and business deduction for decline in value of water facilityinthePrimaryproductioncolumn,itemP8onpage3ofyourschedule.Donotshowcents.

steP 2Writeyourtotaldeductionfornon-primaryproductionlandcareoperationsexpensesandwaterfacilitiesatLandcare operations and business deduction for decline in value of water facilityintheNon-primaryproductioncolumn.Donotshowcents.

steP 3Addupyourprimaryproductionandnon-primaryproductiondeductionsforlandcareoperationsandwaterfacilitiesandwritethetotalatW .

IncOme And eXPense RecOncIlIAtIOn AdJustments

Do you need to make any income or expense reconciliation adjustments?

NO GotoNet income or loss from business this yearonpage44.

YES Readon.

You need to knowYoumayneedtomakeincomereconciliationadjustmentsorexpensereconciliationadjustments.Theseadjustmentsreconcileyourbusinessoperatingprofitorlosswithyourbusinesstaxableincome.

Donotcompleteanyincomereconciliationadjustmentsorexpensereconciliationadjustmentsifalltheamountsyouhavewrittenatc Gross payments where Australian business number not quotedtoW Landcare operations and business deduction for decline in value of water facility,itemP8onyourschedule,areassessableincomeorallowabletaxdeductionsforincometaxpurposes.

Ifyouhaveincludedamountssuchasexemptincomeornon-deductibleexpensesorhavenotincludedamountswhichareassessableincomeorexpenditurethatisdeductible,youmustworkoutyourreconciliationadjustments.

Worksheet6 onpage41willassistyouwithyourcalculations.


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What are income reconciliation adjustments?Incomereconciliationadjustmentsinclude:n income add backs–incomenotshownintheaccounts

whichisassessableincomefortaxpurposes,suchas:– assessablebalancingadjustmentamountson

disposalofdepreciatingassets,and– otherassessableincomenotincludedintheprofit

andlossstatementn income subtractions–incomeshownintheaccounts

whichisnotassessableincome,suchas:– profitonsaleofdepreciatingassets,and– otherincomethatisnotassessableforincometax

purposes–forexample,grossexemptincome.Yourincomereconciliationadjustmentis:

yourtotalincomeaddbacks – yourtotalincome

subtractions

Useworksheet6onpage41toworkoutyourincomereconciliationadjustmentsforyourprimaryandnon-primaryproductionbusinesses.Theamountyouwriteat X Income reconciliation adjustmentsitemP8onyourscheduleisthetotalofyourprimaryproductionandnon-primaryproductionincomeadjustments.Wheretheamountisnegative,printLintheboxattherightoftheamount.

What are expense reconciliation adjustments?Expensereconciliationadjustmentsinclude:n expense add backs–expensesshownintheaccounts

whicharenottaxdeductible,includingtimingdeductions,suchas:– prepaidexpensesnotdeductibleinthisyear– depreciation– lossonsaleofadepreciatingasset,and– otheritemsnotallowableasadeduction–for

example,capitalexpenditure,additionstoprovisionsandreserves,incometaxexpense,expensesrelatingtoexemptincome,debtdeductiondeniedbythethincapitalisationrules,othernon-deductibleexpenses(formoreinformationonthincapitalisation,seepage17andforPSIdeductionsseepage9).

n expense subtractions–itemsnotshownasexpenseswhicharedeductiblefortaxpurposes,suchas:– prepaidexpensesdeductiblethisyearbutnot

includedelsewhere– deductionfordeclineinvalueofdepreciatingassets– deductiblebalancingadjustmentamountson

disposalofdepreciatingassets,and– otheritemsdeductiblefortaxpurposes.

Yourexpensereconciliationadjustmentis:

yourtotalexpenseaddbacks – yourtotalexpense

subtractions

Useworksheet6onpage41toworkoutyourexpensereconciliationadjustmentsforyourprimaryandnon-primaryproductionbusinesses.Theamountyouwriteath Expense reconciliation adjustmentsitemP8onyourscheduleisthetotalofyourprimaryproductionandnon-primaryproductionexpenseadjustments.

Wheretheamountisnegative,printLintheboxattherightoftheamount.


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sPecIFIc RecOncIlIAtIOn AdJustmentsOnpages39–40thereareexamplesofspecificreconciliationadjustmentsthatmayapplytoyou.

IfyouhavechosentoenterorcontinueintheSTSatitemS1,readSTS taxpayersbelowfirst.Otherwisegotopage39.

sts tAXPAYeRs

IfyouareeligibletocontinueintheSTSandhavechosentodosoatitemS1,youmayneedtomakeadditionaladjustments(seeSTStaxpayersonpage13).

MakeadjustmentsinthissectionofitemP8onyourscheduleifyou:n arecontinuingintheSTSthisyear,havechosento

continueusingtheSTSaccountingmethodandtheamountsyouhaveshownattheIncomeandExpensesectionsofitemP8arenotbasedontheSTSaccountingmethod

n arecontinuingintheSTSthisyearandarechangingfromusingtheSTSaccountingmethod,or

n youhavedisposedofdepreciatingassetsduringtheyear.

Theseadjustmentsareexplainedinmoredetailbelow.

Worksheet6onpage41willassistyouwithyourcalculations.

trade debtors and creditors as at 30 June 2007IfyouarecontinuingintheSTSthisyear,havechosentocontinueusingtheSTSaccountingmethodandhaveincludedatitemP8amountsofordinaryincomethathavebeenderivedbutnotreceivedin2006–07,theamountsnotreceivedarenotassessableundertheSTSrulesthisyear–forexample,tradedebtors.

TheseamountsformpartofyourIncome reconciliation adjustmentsat X itemP8.Includetheseamountsat(f)onworksheet6onpage41.

IfyouarecontinuingintheSTSthisyear,havechosentocontinueusingtheSTSaccountingmethodandhaveincludedatitemP8amountsforgeneraldeductions,repairsandtax-relatedexpensesthathavebeenincurredbutnotpaidin2006–07,theamountsnotpaidarenotdeductibleundertheSTSrulesthisyear–forexample,tradecreditors.

TheseamountsformpartofyourExpense reconciliation adjustmentsath itemP8.Includetheseamountsat(n)onworksheet6onpage41.

Adjustment when changing from the sts accounting method

IfyouarecontinuingintheSTSthisyearandhavechosentodiscontinueusingtheSTSaccountingmethodreadon.

IfyouhavenotincludedunderIncomeatitemP8amountsofordinaryincomethatwerederivedbutnotreceivedwhileusingtheSTSaccountingmethod,theseamountsareassessablethisyear.

Includetheseamountsat(b)onworksheet6onpage41.

IfyouhavenotincludedunderExpensesatitemP8amountsofgeneraldeductions,repairsortax-relatedexpensesthatwereincurredbutnotpaidwhileusingtheSTSaccountingmethod,theseamountsaredeductiblethisyear.

Includetheseamounts(otherthantax-relatedexpenses)at(t)onworksheet6onpage41.Showyourdeductionfortax-relatedexpensesatD10onyourtaxreturn.

disposal of depreciating assetsIfyoudisposedofanydepreciatingassetsduringtheincomeyear,thefollowingamounts(ifany)formpartofyourIncome reconciliation adjustmentsat X itemP8:n thetaxablepurposeproportionoftheterminationvalue

oflow-costassetsdisposedofforwhichanimmediatedeductionhasbeenclaimed

n iftheclosingpoolbalanceofanSTSpoolislessthanzero,theamountbelowzero,and

n assessablebalancingadjustmentamountsonthedisposalofdepreciatingassetsnotallocatedtoSTSpools.

SeetheDefinitionsboxonpage26foranexplanationoftheseterms.

Includetheamountsat(b)onworksheet6onpage41.

AnydeductiblebalancingadjustmentamountsonthedisposalofdepreciatingassetsthatyouhavenotallocatedtoSTSpoolsformpartofyourExpense reconciliation adjustmentsath itemP8.Includetheseamountsat(q)onworksheet6onpage41.

Formoreinformationonassessablebalancingadjustmentamountsanddeductiblebalancingadjustmentamounts,seetheGuide to depreciating assets 2007.

Readtheinformationonpages39–40todetermineifyouneedtomakeanyfurtherreconciliationadjustments.


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exiting the sts this yearIfyouhaveexitedtheSTSandhaveamountsofordinaryincomethatyouderivedbutdidnotreceivewhileyouwereintheSTS,theseamountsareassessableinthisyear–forexample,debtorsat30June2006.

Includetheseamountsat(b)onworksheet6onpage41,unlessyouhavealreadyincludedthemasincomeatitemP8.

Similarly,ifyouhaveexitedtheSTSandhaveamountsofgeneraldeductions(includingrepairsandtax-relatedexpenses)thatyouincurredbutdidnotpaywhileyouwereintheSTS,theseamountsaredeductiblethisyear–forexample,creditorsasat30June2006.

Includetheseamounts(otherthantax-relatedexpenses)at(t)onworksheet6,unlessyouhavealreadyincludedthemasdeductionsatitemP8.Showyourdeductionfortax-relatedexpensesatD10onyourtaxreturn.

Prepaid expensesSpecialrulesmayaffectthetimingofdeductionsforprepaidexpenditure.Undertheserulesyoumayneedtoapportioncertainprepaidexpensesovermorethanoneincomeyear.Youmustmakeanexpensereconciliationadjustmenttoaddbackthatpartoftheexpensethatisnotdeductibleintheyearitisincurred.Showtheadjustmentat(k)onworksheet6.

Ifyouhadaprepaidexpenseinaprioryearwhichistobeapportionedovertheserviceperiodandyouareentitledtoadeductionforpartoftheexpensethisyearbuthavenotincludeditelsewhere,showtheadjustmentasanexpensesubtractionat(s)onworksheet6.

Forfurtherinformationabouttheprepaymentrules,seethepublicationDeductions for prepaid expenses 2007.

deduction for decline in value (non-sts taxpayers only)Adeductionforadeclineinvalueofadepreciatingassetcalculatedunderincometaxlawmaydifferfromtheaccountingorbookcalculationofdepreciation.Differentrulesregardingsuchthingsaseffectivelife,thecalculationofbalancingadjustmentamountsandthetreatmentofdebtforgivenessamountscanproduceadiscrepancybetweenthetwocalculations.

Underincometaxlawyoucandeductanamountequaltothedeclineinvalueofadepreciatingassetinthe2006–07incomeyearifyouheldthedepreciatingassetforanytimeduringtheyearandusedit(orinstalleditreadyforuse)forataxablepurpose,suchasforproducingassessableincome.

Thedeductionisreducedtotheextentyoudonotusetheassetforataxablepurpose.

Tohelpyoucalculateyourdeductionfordeclineinvalue,seetheGuide to depreciating assets 2007,whichalsoprovidesexplanationsofrelevantterms.Theguidealsoexplainstheoptiontoallocatetoalow-valuepooldepreciatingassetsthatcostlessthan$1,000(excludinginputtaxcreditentitlements)anddepreciatingassetsthathaveanopeningadjustablevalueoflessthan$1,000.

Ifyouchoosetousethelow-valuepoolmethodtocalculatethedeclineinvalueoflow-costorlow-valuedepreciatingassetsandthepoolcontainsassetsusedforwork-related,self-educationorrentalpurposes,readquestionD6inTaxPack 2007.DonotincludethedeductionatitemP8onyourschedule.Ifnoneofthedepreciatingassetsinthepoolisusedforanyofthosepurposes,includetheamountofyourlow-valuepooldeductionat(r)onworksheet6.Wherenecessary,makeareasonableapportionmentbetweenprimaryproductionandnon-primaryproductionactivities.

Youshouldalsoincludethedeductionfordeclineinvalueofdepreciatingassetsnotallocatedtoapoolat(r)onworksheet6.

Youshouldalsoaddbackthedepreciationchargedinyouraccountsandshownatm Depreciation expensesintheExpensessectionofitemP8asanexpensereconciliationadjustment.Includetheamountat(h)onworksheet6.Theamountat(h)shouldnotincludeanySTSpooldeductionswhichyouhaveclaimedatm .

luxury car leasingAleasedcar,eitherneworsecond-hand,isaluxurycarifitscostexceedsthecarlimitthatappliesforthefinancialyearinwhichtheleasecommences.Thecarlimitfor2006–07is$57,009.

Luxurycarleasesenteredintoafter7.30pm(bylegaltimeintheACT)on20August1996(otherthangenuineshort-termhirearrangements)aretreatedasanotionalsaleandloantransaction.

Thecostorvalueofthecarspecifiedinthelease(orthemarketvalueifthepartieswerenotdealingatarm’slengthinconnectionwiththelease)istakentobethecostofthecarforthelesseeandtheamountloanedbythelessortothelesseetobuythecar.

Inrelationtothenotionalloan,theactualleasepaymentsaredividedintonotionalprincipalandfinancechargecomponents.Thatpartofthefinancechargecomponentforthenotionalloanapplicablefortheparticularperiod(theaccrualamount)isdeductibletothelesseesubjecttoanyreductionrequiredunderthethincapitalisationrules.

TheamountformspartofyourExpense reconciliation adjustmentsath itemP8onyourschedule.Includetheamountat(p)onworksheet6.


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Inrelationtothenotionalsale,thelesseeistreatedastheholderoftheluxurycarandmaybeentitledtoclaimadeductionforthedeclineinvalueofthecar.IfthelesseeisanSTStaxpayerfortheincomeyearinwhichtheleaseisenteredinto,thelesseeallocatesthecartotheirgeneralSTSpool.

Forthepurposeofcalculatingthededuction,thecostofthecarislimitedtothecarlimitforthefinancialyearinwhichtheleaseisgranted.

Formoreinformationondeductionsforthedeclineinvalueofleasedluxurycars,seetheGuide to depreciating assets 2007.

Insummary,thelesseeisentitledtodeductionsequalto:n theaccrualamount,andn thedeclineinvalueoftheluxurycar,basedonthe

applicablecarlimit,unlessthecarisallocatedtothegeneralSTSpool.

Youreducebothdeductionstoreflectanyuseofthecarforotherthanataxablepurpose.

WhereyouallocatethecartothegeneralSTSpoolwiththecostbasedontheapplicablecarlimit,seepage26tocalculatethedeductionundertheSTSdepreciationrules.

Ifyouhaveincludedtheleaseexpenseat J Lease expensesintheExpensessectionofitemP8inyourschedule,theamountshouldalsoformpartofyourExpense reconciliation adjustmentsath itemP8.Includetheamountat(i)onworksheet6.Includethedeductionfortheaccrualamountat(p).

Iftheleaseterminatesorisnotextendedorrenewedandthelesseedoesnotactuallyacquirethecarfromthelessor,thelesseeistreatedundertherulesasdisposingofthecarbywayofsaletothelessor.Thisconstitutesabalancingadjustmentevent.IfthecarisnotsubjecttotheSTSrules,anyassessableordeductiblebalancingadjustmentamountforthelesseemustbedetermined.Ifthecarhasbeenallocatedtothelessee’sgeneralSTSpool,seecalculation5 forSTStaxpayersonpage27.

hire purchase agreementsHirepurchaseandinstalmentsaleagreementsofgoodsaretreatedasasaleofthepropertybythefinancier(orhirepurchasecompany)tothehirer(orinstalmentpurchaser).

Thesaleistreatedasbeingfinancedbyaloanfromthefinanciertothehireratasalepriceofeithertheiragreedcostorvalueortheproperty’sarm’slengthvalue.

Theperiodichirepurchase(orinstalment)paymentsaretreatedaspaymentsofprincipalandinterestunderthenotionalloan.Theinterestcomponentisdeductibletothehirer,subjecttoanyreductionrequiredunderthethincapitalisationrules.ThisamountformspartoftheExpense reconciliation adjustmentsath itemP8onyourschedule.Includetheamountat(t)onworksheet6.

Inrelationtothenotionalsale,thehirerofadepreciatingassetistreatedastheholderoftheassetandeitherallocatestheassettotheappropriateSTSpooliftheyareanSTStaxpayerfortheincomeyear,ormaybeentitledtoclaimadeductionforthedeclineinvalueofthedepreciatingasset.Thecostoftheassetforthispurposeistakentobetheagreedcostorvalue,orthearm’slengthvalueifthedealingisnotatarm’slength.

IfyouhaveincludedhirepurchasechargesasanexpenseinitemP8onyourschedule,theamountshouldalsoformpartofyourExpense reconciliation adjustmentsath itemP8.Includetheamountat(n)onworksheet6.

termination of a limited recourse debt

ExcessivedeductionsforcapitalallowancesareincludedinassessableincomeunderthelimitedrecoursedebtrulescontainedinDivision243oftheITAA1997.Thiswilloccurwhere:n expenditureonpropertyhasbeenfinancedor

re-financedwhollyorpartlybythelimitedrecoursedebtn thelimitedrecoursedebtisterminatedafter27February

1998buthasnotbeenpaidinfullbythedebtor,andn becausethedebthasnotbeenpaidinfull,thecapital

allowancedeductionsallowedfortheexpenditureexceedthedeductionsthatwouldbeallowableiftheunpaidamountofthedebtwasnotcountedascapitalexpenditureofthedebtor.Specialrulesapplyinworkingoutwhetherthedebthasbeenfullypaid.

Alimitedrecoursedebtisadebtwheretherightsofthecreditorasagainstthedebtorintheeventofdefaultinpaymentofthedebtorofinterestarelimitedwhollyorpredominantlytothepropertywhichhasbeenfinancedbythedebtorissecurityforthedebt,orrightsinrelationtosuchproperty.Adebtisalsoalimitedrecoursedebtif,notwithstandingthattheremaybenospecificconditionstothateffect,itisreasonabletoconcludethatthecreditor’srightsasagainstthedebtor’sarecapableofbeingsolimited.

AlimitedrecoursedebtincludesanotionalloanunderahirepurchaseorinstalmentsaleagreementofgoodstowhichDivision240oftheITAA1997applies.Seesection243-20.

TheamountthatisincludedwithinassessableincomeasaresultoftheseprovisionsformspartofyourIncome reconciliation adjustmentsat X itemP8onyourschedule.Includetheamountat(b)onworksheet6.


P8

WORKsheet 6: Reconciliation statementReconcileyourprimaryproductionandnon-primaryproductionitemsseparately.

INCOME RECONCILIATION ADJUSTMENTS Primary production


Additions Assessablebalancingadjustmentamountsondisposalofdepreciatingassets (a) $ $

Assessablebusinessincomenotincludedintheprofitandlossstatement (b) $ $

Subtotal:add(a)and(b). (c) $ $

Subtractions Netexemptincome–grossexemptincomelessexpensesrelatingtothatexemptincome (d) $ $

Profitonsaleofdepreciatingassetsincludedinaccounts (e) $ $

Othernon-assessableincomeincludedintheprofitandlossstatement (f) $ $

Subtotal:add(d),(e)and(f). (g) $ $

Income reconciliation adjustments:(c)minus(g) $ $

EXPENSE RECONCILIATION ADJUSTMENTS Primary production


Additions Depreciationchargedinaccounts (h) $ $

Leasepaymentsforluxurycars (i) $ $

Lossonsaleofdepreciatingassetsincludedinaccounts (j) $ $

Partofprepaidexpensesnotdeductiblethisyear (k) $ $

Itemsnotallowableasdeductions:–capitalexpenditure (l) $ $

–additionstoprovisionsandreserves (m) $ $

–othernon-deductibleitems,includingincometax (n) $ $

Subtotal:add(h),(i),(j),(k),(l),(m)and(n). (o) $ $

Subtractions Accrualamountdeductionforlesseeofluxurycars (p) $ $

Deductiblebalancingadjustmentamountsondisposalofdepreciatingassets (q) $ $

Deductionfordeclineinvalueofdepreciatingassets(non-STStaxpayersonly) (r) $ $

Partofprepaidexpensesdeductiblethisyearbutnotincludedelsewhere (s) $ $

Otheritemsdeductiblefortaxpurposesnotincludedintheprofitandlossstatement (t) $ $

Subtotal:add(p),(q),(r),(s)and(t). (u) $ $

Expense reconciliation adjustments:(o)minus(u) $ $

Note 1 Onlyincludeamountsat(h)ifyouarenotanSTStaxpayer.However,excludeanySTSpooldeductionswhichyouhaveincludedatm itemP8becauseyouhaveexitedtheSTS.

Note 2 SeetheGuide to depreciating assets 2007foranexplanationofdepreciatingassets.

Note 3 Ifyouhaveincludedanamountofcapitalexpenditureincurredtoterminatealeaseorlicenceat J Lease expensesitemP8,makeareconciliationadjustmentat h Expense reconciliation adjustments item5 byincludingtheamountofcapitalexpenditureasanexpenseaddbackandtakingawaythatpartoftheexpensewhichisallowedasataxdeduction.


P8


steP 1Completeworksheet6usingtheexplanationsprovidedonpages37–40.Thiswillgiveyouyourtotalincomeandexpensereconciliationamounts(primaryandnon-primaryproduction)thatyouneedforyourschedule.

steP 2Transferthetotalsintheyellowrowsontheworksheettotheappropriateboxesonpage3ofyourschedule.Donotshowcents.

steP 3Ifanyofthereconciliationadjustmentamountsisnegative,printLintheboxattherightoftheamount.

steP 4Addupyourprimaryproductionandnon-primaryproductionIncome reconciliation adjustmentsandwritethetotalat X .

steP 5Addupyourprimaryproductionandnon-primaryproductionExpense reconciliation adjustmentsandwritethetotalath .

steP 6Ifthetotalincomereconciliationadjustmentamountisnegative,printLintheboxattherightoftheamountat X .Ifthetotalexpensereconciliationadjustmentamountisnegative,printLintheboxattherightofh .

NOTEDonotincludeintheamountat(t)onworksheet6:n environmentalprotectionexpendituren section40-880deductionsn businessdeductionsforprojectpools,orn deductionsforlandcareoperationsandwaterfacilities.

Reconciliationadjustmentsfortheseamountsareshownseparatelyat v , A , l andW onyourschedule.


P8

WORKsheet 7: Working out your net income or loss from primary production business this year

WriteyourprimaryproductiontotalbusinessincomeshowninthePrimaryproductioncolumnatTOTAL BUSINESS INCOMEitemP8. (a) $

Writeyourprimaryproductiontotalbusinessexpensesshownat s itemP8. (b) $

Adduptheamountsofanydeductionsforprimaryproductionenvironmentalprotectionexpenses,section40-880expenditure,projectpoolandlandcareoperationsandwaterfacilitiesandwritethetotalat(c). (c) $

Addtheamountat(b)totheamountat(c). (d) $

Taketheamountat(d)fromtheamountat(a). (e) $

Writeyourprimaryproductionincomereconciliationadjustment(ifany). (f) $

Writeyourprimaryproductionexpensereconciliationadjustment(ifany). (g) $

Your net income or loss from your primary production business–add(e),(f)and(g). (h) $

NOTEIftheamountat(d)ismorethantheamountat(a),theamountat(e)isaloss.Ifitis,orifyouhaveanegativeamountat(f)or(g),theexamplesbelowwillhelpyoutoworkoutyourlossfromprimaryproductionbusiness.

WORKsheet 8: Working out your net income or loss from non-primary production business this year

Writeyournon-primaryproductiontotalbusinessincomeshownintheNon-primaryproductioncolumnatTOTAL BUSINESS INCOMEitemP8. (i) $

Writeyournon-primaryproductiontotalbusinessexpensesshownat t itemP8. (j) $

Adduptheamountsofanydeductionsfornon-primaryproductionenvironmentalprotectionexpenses,section40-880expenditure,projectpool,landcareoperationsandwritethetotalat(k). (k) $

Addtheamountat(j)totheamountat(k). (l) $

Takeawaytheamountat(l)fromtheamountat(i). (m) $

Writeyournon-primaryproductionincomereconciliationadjustment(ifany). (n) $

Writeyournon-primaryproductionexpensereconciliationadjustment(ifany). (o) $

Your net income or loss from your non-primary production business–add(m),(n)and(o). (p) $

NOTEIftheamountat(l)ismorethantheamountat(i),theamountat(m)isaloss.Ifitis,orifyouhaveanegativeamountat(n)or(o),theexamplesbelowwillhelpyoutoworkoutyourlossfromnon-primaryproductionbusiness.

eXAmPles

n Iftheamountat(e)isa$5,000loss,theamountat(f)is$12,000income,andtheamountat(g)isa$1,000loss,thenetincomefromtheprimaryproductionbusinessat(h)is$6,000.

n Iftheamountat(e)is$5,000profit,theamountat(f)is$2,000incomeandtheamountat(g)isan$8,000loss,thelossfromtheprimaryproductionbusinessat(h)is$1,000.

n Iftheamountat(m)isa$5,000loss,theamountat(n)isa$4,000lossandtheamountat(o)isa$1,000loss,thelossfromthenon-primaryproductionbusinessat(p)is$10,000.


P8

net IncOme OR lOss FROm BusIness thIs YeARUseworksheets7and8onpage43toworkoutyournetincomeorlossfromyourprimaryandnon-primaryproductionbusinessesthisyear,notincludinganynon-commercialbusinesslossesdeferredfromaprioryear.


steP 1Transfertheamountat(h)onworksheet7to B itemP8onpage3ofyourschedule.Donotshowcents.Iftheamountisaloss,printLintheboxattherightofthisamount.

steP 2Transfertheamountat(p)onworksheet8toc itemP8onpage3ofyourschedule.Donotshowcents.Iftheamountisaloss,printLintheboxattherightofthisamount.

steP 3Add B andc andwritethetotalintheadjacentTotalscolumn.Theamountshownshouldnotincludeanynon-commercialbusinesslossesdeferredfromaprioryear(whichareshownatd or e –seeDeferred non-commercial business losses from a prior yearinthenextcolumn).

Ifyoumadealossfromyourbusiness,printLintheboxattherightofthisamount.

Iftheamountat B orc includesdetailsfrommorethanonebusinessactivity,andanyoneoftheseactivitiesresultedinanetloss,youalsoneedtocompleteitemsP3andP9onyourschedule.

deFeRRed nOn-cOmmeRcIAl BusIness lOsses FROm A PRIOR YeAR

Do you have any deferred non-commercial business losses from a prior year?

NO GotoNet income or loss from business,includinglossesdeferredfromaprioryearonpage45.

YES Readon.

You need to knowAdeferrednon-commercialbusinesslossisalossyouincurredinaprioryearwhichyouwereunabletoclaimagainstotherincome.

NOTEThenon-commercialbusinesslossmaybereducedif:n youearnednetexemptincomeinthisincomeyear,orn youbecamebankruptorwerereleasedfrom

anydebtsbytheoperationofanActrelatingtobankruptcy.

Foranexplanationofnetexemptincome,seequestionL1inTaxPack 2007.FormoreinformationphonetheBusinessInfoline(seetheinsidebackcover).


steP 1Atd itemP8onpage3ofyourschedulewritetheamountofanyprimaryproductionlossesyoudeferredinaprioryearfromactivitiesthatarethesameorsimilartoyourcurrentyearactivity.Donotshowcents.

steP 2At e writetheamountofanynon-primaryproductionlossesyoudeferredinaprioryearfromactivitiesthatarethesameorsimilartoyourcurrentyearactivity.Donotshowcents.

steP 3Addupyourprimaryandnon-primaryproductiondeferrednon-commercialbusinesslosses.WritethetotalatDeferred non-commercial business losses from a prior yearintheTotalscolumn.


net IncOme OR lOss FROm BusInessThisamounttakesintoaccountlossesdeferredfromaprioryear.


steP 1Ifyouhavenet incomefromprimaryproductionbusinessthisyearat B ,takeawayfromittheamountofyourdeferrednon-commercialprimaryproductionbusinesslossesfromaprioryearshownatd .Writetheanswerat Y Net income or loss from businessitemP8onpage3ofyourschedule.

Iftheamountat Y isnegative,printLintheboxattherightoftheamount.

Ifyouhavealossfromprimaryproductionbusinessthisyearat B ,addittotheamountofyourdeferrednon-commercialprimaryproductionbusinesslossesfromaprioryearshownatd .Writethetotalat Y Net income or loss from businessitemP8onyourscheduleandprintLintheboxattherightoftheamount.

NOTEIfyouhaveprintedLintheboxattherightoftheamountat Y ,youalsoneedtocompleteitemsP3andP9onyourschedule.

steP 2 Ifyouhavenet incomefromnon-primaryproductionbusinessthisyearatc , takeawayfromittheamountofyourdeferrednon-commercialnon-primaryproductionbusinesslossesfromaprioryearshownat e .Writetheanswerat Z Net income or loss from businessitemP8onpage3ofyourschedule.

Iftheamountat Z isnegative,printLintheboxattherightoftheamount.

Ifyouhavealossfromnon-primaryproductionbusinessthisyearatc ,addittotheamountofyourdeferrednon-commercialnon-primaryproductionbusinesslossesfromaprioryearshownat e .Writethetotalat Z Net income or loss from businessitemP8onyourscheduleandprintLintheboxattherightoftheamount.

NOTEIfyouhaveprintedLintheboxattherightoftheamountat Z ,youalsoneedtocompleteitemsP3andP9onyourschedule.

steP 3Adduptheamountsshownat Y and Z .

WritetheansweratNet income or loss from businessintheTotalscolumn.Ifthetotalisnegative,printLintheboxattherightoftheamount.

steP 4Transfertheamountsat Y and Z onyourscheduleto B andc (respectively)item14onyourtaxreturn(supplementarysection).

P9BUSINESSLOSSACTIVITYDETAILSDid you have a loss from a business activity you carried on either as a sole trader or in partnership?

NO IfyouareanSTStaxpayer,gotoP10STS depreciating assetsonpage49.Otherwise,gotoOther business and professional itemsonpage49.

YES Readon.

IMPORTANTYoumustreadalltheinformationinthisquestionandcompleteActivity 1and(ifnecessary)Activity 2 and Activity 3,beforeyoucompleteitem15onyourtaxreturn(supplementarysection).

You need to knowRulesrelatingtonon-commercialbusinesslosseshaveappliedsince1July2000.Undertherules,youcanusea2006–07lossfromabusinessactivityyouconducteitherasasoletraderorinpartnershipincalculatingyour2006–07taxableincomeonlyifitmeetsoneoftheseconditions:n anexception(seebelow)appliesn oneofthefour tests(seepage46)issatisfiedn ifnoneofthefourtestsissatisfied,theCommissioner

hasexercisedhisdiscretion,orruledthatitwillbeexercised,toallowyoutoclaimtheloss.

Youcannotclaimlossesarisingfromactivitiesyouconductthatareaprivaterecreationalpursuitorhobbyorifthereisnolikelihoodofprofit.

IMPORTANTKeeprecordsofeachofthenetlossesdeferredforyourseparatebusinessactivities.

the exceptionsIfyouoperateaprimary productionbusinessoraprofessional artsbusinessandyourassessableincomefor2006–07(exceptanynetcapitalgain)fromothersourcesthatdonotrelatetothatactivityislessthan$40,000,youmayclaimyourbusinesslossthisyear.

Aprofessionalartsbusinessisabusinessyoucarryonasanauthorofaliterary,dramatic,musicalorartisticworkasaperformingartist,orasaproductionassociate.

NOTEYourassessableincomeexcludesanyGSTonataxablesupplyyoumake.YoumustberegisteredorrequiredtoberegisteredforGSTtomakeataxablesupply.

P8 – P9


deferring your loss

If you are unable to claim your loss this year because of these rules, you must defer the loss.

This deferred loss is not disallowed.Instead,youtakeitintoaccountforthenextincomeyearinwhichyoucarryonthisbusinessactivity,oroneofasimilarkind.

Thedeferredlossisadeductionwhencalculatinganynetprofitorlossfromtheactivityinthatfutureyear.

Whetheranyoveralllosscanbetakenintoaccountinyourcalculationoftaxableincomeforthatfutureyearwilldependontheapplicationofthenon-commercialbusinesslossdeferralrulesinthatyear.

Ifyouareunabletoclaimyourlossagainstotherincomethisyearbecauseoftheserules,youmustdeferyourlossbyshowingtheamountatitem15onyourtaxreturn(supplementarysection).Theamountshownatitem15cannotbeusedtoreduceyour2006–07taxableincome.

MakesureyoucompleteActivity 1 belowandActivity 2 and Activity 3 onpage48beforeyoucompleteitem15onyourtaxreturn(supplementarysection).

What you may need

Ifyouareapartnerinapartnership,youwillneedthefollowingdetailsforeachbusinessactivitythatyou,asapartner,wereinvolvedin:n theamountofassessableincomeearnedbythe

partnershipfortheactivityn theshareofpartnershipassessableincome,real

propertyandcertainotherassets,attributabletopartnerswhoarenotindividuals

n yourshareofincomeorlossfromthepartnershipoftheactivity.

ActIvItY 1

descRIPtIOn OF ActIvItY

Completing this itemDescribethebusinessactivityfromwhichyoumadethelargestlossandprintthisatd itemP9onpage4ofyourschedule.Ifyourbusinessactivityistheresultofaninvestmentinataxeffectivearrangement,printthenameoftheprojectatd .

PARtneRshIP OR sOle tRAdeR

Completing this itemAt F itemP9 printeitherPintheboxatPartnership(lossfromabusinessactivitycarriedoninpartnershipwithothers)orSintheboxatSole trader(lossfromabusinessactivitycarriedonasasoletrader),asappropriate.

the four testsYouwillnothavetodeferyourlossfromyourbusinessactivityiftheactivitysatisfiesatleastoneofthefollowingfourtests:n thereisatleast$20,000ofassessableincomefrom

thebusinessactivityforthisincomeyearn thebusinessactivityhasproducedaprofitfortax

purposesinthreeoutofthepastfiveyears,(includingthecurrentyear)

n thevalueofrealpropertyassets(excludinganyprivatedwelling)usedonacontinuingbasisincarryingonthebusinessactivityisatleast$500,000

n thevalueofcertainotherassets(exceptcars,motorcyclesandsimilarvehicles)usedonacontinuingbasisincarryingonthebusinessactivityisatleast$100,000.

NOTESpecialrulesapplyforthesefourtestsifyouareundertakingabusinessactivityinpartnership.SeeNon-commercial losses: partnerships – fact sheet(NAT3385),availableonourwebsite,orphonetheBusinessInfoline(seetheinsidebackcover).

the commissioner’s discretionInlimitedcircumstances,theCommissionercanexercisehisdiscretiontoallowalossfromabusinessactivitytobeclaimedintheyearitarises,eventhoughnoneofthefourtestsaresatisfied,providedthateither:n thebusinessactivityhasbeenaffectedbyspecial

circumstancesoutsidethecontroloftheoperatorsofthebusiness–forexample,naturaldisasters–wheretheactivitywouldhavesatisfiedoneofthefourtestsbutforthesespecialcircumstances,or

n thebusinessactivity,becauseofitsnature,hasaleadtimeand,forthisreason,doesnotsatisfyanyofthefourtests,butthereisanobjectiveexpectationthatitwilleventuallydosowithinaperiodthatiscommerciallyviablefortheindustryconcerned.‘Commercialviability’ismeasuredagainstindependentindustrystandards.

You must apply in writing for advice on whether the Commissioner will exercise this discretion.Todothis,completetheApplication for a private ruling on the exercise of the Commissioner’s discretion for non-commercial business loss(NAT5806).Formoredetailsabouttheserules,phonetheBusinessInfolineforassistance(seetheinsidebackcover).

P9


tYPe OF lOssSelectthemostappropriatecodefromthefollowinglistandwriteitatg itemP9onpage4ofyourschedule.1 Yourassessableincomefromthebusinessactivityfor

thisincomeyearisatleast$20,000.2 Thebusinessactivityhasproducedaprofitfortax

purposesinthreeoutofthepastfiveyears(includingthecurrentyear).

3 Thevalueofrealpropertyassetsorinterestsinrealproperty(excludinganyprivatedwelling)usedonacontinuingbasisincarryingonthebusinessactivityisatleast$500,000.

4 Thevalueofcertainotherassets(exceptcars,motorcyclesorsimilarvehicles)usedonacontinuingbasisincarryingonthebusinessactivityisatleast$100,000.

5 TheTaxOfficehasadvisedyouinwritingthattheCommissionerwillexercisehisdiscretiontoallowyoutoclaimalossinrelationtothatbusinessactivityforthisincomeyear.ThisiswheretheCommissionerhasissuedaproductrulingoraprivatebindingrulingallowinglossestobeclaimedfromanactivityyouparticipatein.

6 Thelossisfromabusinessactivityyouoperatedthatisaprofessionalartsbusinessandyourassessableincome(excludinganynetcapitalgain)fromsourcesnotrelatedtothatactivityislessthan$40,000.(Aprofessionalartsbusinessisabusinessyoucarryonasanauthorofaliterary,dramatic,musicalorartisticwork,asaperformingartist,orasaproductionassociate.)

7 Thelossisfromabusinessactivityyouoperatedthatisaprimaryproductionbusinessandyourassessableincome(excludinganynetcapitalgain)fromsourcesnotrelatedtothatactivityislessthan$40,000.

8 Noneoftheabovecodesappliesandyoumustdeferyourloss.Completeitem15onyourtaxreturn(supplementarysection).

Formoreinformation,seeTaxation Ruling 2001/14 – Income tax: Division 35: non-commercial business losses.

USINGLOSSCODE5Somebusinessactivitiesmaybecoveredbyaproductrulingorprivaterulingthatdoesnotrelatetothecurrentincomeyear.Uselosscode5onlyifyouhaveadviceinwritingthattheCommissioner’sdiscretionwillbeexercisedfor2006–07.IfyouhaveappliedforaprivatebindingrulingabouttheexerciseoftheCommissioner’sdiscretionfor2006–07buthavenotyetreceivedtheruling,youshoulduselosscode8unlessanothercodeapplies.

USINGLOSSCODE8Ifyouprintcode8atg ,m or s itemP9youmustdeferyourloss.Youmustalsocompleteitem15onyourtaxreturn(supplementarysection).

ELECTRONICLODGMENTSForsometaxreturnslodgedelectronically:n wherethereisalossfromapartnershipfrom

apassiveinvestment–forexample,fromarentalproperty–youwillneedtousecode0atg itemP9

n whereyouhavecorrectlyshowntherelevantlosscodebutanelectroniceditpreventsyoufromlodgingyourtaxreturnelectronically,phonetheBusinessInfolineforassistance(seetheinsidebackcover).

Did you use loss code 5 at g item P9?

NO GotoDeferred non-commercial business loss from a prior yearbelow.

YES Ifyouusedcode5atg youmustcompleteReference for code 5atc itemP9onpage4ofyourschedule.Readon.

ReFeRence FOR cOde 5


IfyourbusinessactivityiscoveredbyaproductrulingthatincludesadvicethattheCommissionerwillexercisehisdiscretiontoallowalossfromthatbusinessactivity:n printPRatc inthecodesectionofReference for

code 5,itemP9onpage4ofyourschedulen writetheyearoftheproductrulingat Y intheyear

sectionn writetheproductrulingnumberat A inthenumber

section(donotincludetheyearoftheproductrulingortheslash/at A ).

Alternatively,ifyourbusinessactivityiscoveredbyaprivaterulingthatincludesadvicethattheCommissionerwillexercisehisdiscretiontoallowalossfromthatbusinessactivity:n printANatc inthecodesectionofReference for

code 5,itemP9onpage4ofyourschedulen leave Y blankintheyearsectionn writetheauthorisation number whichwasprintedon

thefrontpageofyournoticeofprivaterulingat A inthenumbersection.

stOPYoumustprovideoneofthesenumbersifyouusedlosscode5atg Type of loss.Usinganinvalidrulingorauthorisationnumber,onewhichdoesnotapplytoyouoronewhichdoesnotapplyforthe2006–07incomeyear,mayresultinanunderstatementofyourtaxpayable.Penaltiesandinterestmayapply.

deFeRRed nOn-cOmmeRcIAl BusIness lOss FROm A PRIOR YeAR

Completing this itemWritetheamountofyourdeferrednon-commercialbusinesslossfromaprioryearforthebusinessactivityath itemP9onpage4ofyourschedule.Donotshowcents.

P9


P9

ActIvItY 2 And ActIvItY 3

Filloutdetailsforthesecondandthirdlargestlosses(ifapplicable)inthesamewayyouhavedoneforActivity 1.

NOTEIfyoumadealossfrommorethanthreebusinessactivities,determinewhetheryouneedtodeferthelossforeachadditionalbusinessactivity.Youwillneedthetotalamountofyourdeferrednon-commercialbusinesslossestocompleteitem15onyourtaxreturn(supplementarysection).

net lOss


Writeyournetlossfromthebusinessactivityfor2006–07at I itemP9onpage4ofyourschedule.Donotshowcents.Forpartnersinapartnershipthiswouldbeyourshareofthenetlossfromthebusinessactivityandincludesanydeferrednon-commercialbusinesslossesfromtheprioryearclaimedat X or Y item12onyourtaxreturn(supplementarysection).

TheexamplebelowwillhelpyouworkoutP9.

eXAmPle

ThefollowingexampleshowshowtofillinP8andP9onyourscheduleandhowtheamountslinktoyourtaxreturn(supplementarysection).

In2006Kierenhadtodeferhisnon-commercialbusinesslossof$6,000fromhisbeefcattleprimaryproductionbusinessactivity.Healsohadtodeferhisnon-commercialbusinesslossof$3,000fromhisretailbusinessactivity.Becauseheoperatedthesameactivitiesinthe2007incomeyearhecanclaimthe$6,000businesslossfromthebeefcattleprimaryproductionbusinessactivityasadeductioninrelationtocalculatinganynetprofitorlossfromthatbusinessactivityforthisincomeyear;andthe$3,000businesslossfromtheretailnon-primaryproductionbusinessactivityasadeductioninrelationtocalculatinganynetprofitorlossfromthatbusinessactivityforthisincomeyear.Kierenwouldshowtheamountof$6,000asadeductionatd itemP8,andtheamountof$3,000asadeductionat e itemP8and$9,000attheTotalsonhisBusiness and professional items schedule for individuals 2007.

P8 Business income and expenses

Primary production Non-primary production Totals

Deferrednon-commercialbusinesslossesfrom

aprioryear0006 0009 ,,0003 ,

.00e ,,.00d ,

.00

Thisyear,Kierenmadealossof$4,000fromthebeefcattleprimaryproductionbusiness.Aftertakingintoaccounthisdeferrednon-commercialprimaryproductionbusinesslossof$6,000fromtheprioryear,hemadeanetlossof$10,000.Hedidnotsatisfyanyofthenon-commercialbusinesslosscriteriathatallowabusinesslosstobeusedtoreduceotherincomesohemustdeferthe$10,000netlossthisyear.

Kierenwouldshowthe$6,000deferrednon-commercialbusinesslossfromtheprioryearath itemP9andthenetlossof$10,000at I itemP9onhisBusiness and professional items schedule for individuals 2007.Asthelossistobedeferredhewouldshowlosscode8atg itemP9intheType of lossbox.SeeType of lossonpage47foradescriptionofthelosscodes.

.00

P9 Business loss activity details

ELTTACFEEBdDescriptionofactivity

eTaxOfficeuseonly F

Showdetailsofuptothreebusinessactivitiesinwhichyoumadeanetlossthisyear.Listtheminorderofsizeofloss–greatestfirst.Ifyouarecompletingthisitembecauseyouhavedeferrednon-commercialbusinesslosses,youmustalsocompleteitem15onyourtaxreturn.

Soletrader

8

Partnership

g

STypeofloss

ActIvItY 1

00001 , .00INetloss ,0006 ,hDeferrednon-commercialbusinesslossfromaprioryear ,

cReferenceforcode5

cOde

YnumBeR

A/YeAR


Thisyear,Kierenmadealossof$5,000fromtheretailnon-primaryproductionbusiness.Aftertakingintoaccounthisdeferrednon-commercialnon-primaryproductionbusinesslossof$3,000fromtheprioryear,hemadeanetlossof$8,000.Hedidnotsatisfyanyofthenon-commercialbusinesslosscriteriathatallowabusinesslosstobeusedtoreduceotherincomesohemustdeferthe$8,000netlossthisyear.

Kierenwouldshowthe$3,000deferrednon-commercialbusinesslossfromtheprioryearatn itemP9andthenetlossof$8,000atO itemP9onhisBusiness and professional items schedule for individuals 2007.Asthelossistobedeferredhewouldshowlosscode8atm itemP9intheType of lossbox.SeeType of lossonpage47foradescriptionofthelosscodes.

Kierenwouldalsoneedtocompleteg , I and J item15onhistaxreturn(supplementarysection),deferringhisnetlossesof$10,000fromprimaryproductionand$8,000fromnon-primaryproduction,atotaldeferrednetlossof$18,000.Hewouldnotbeabletousethisnetlosstoreducehisotherincomethisyear.

P10STSDEPRECIATINGASSETSItemP10isforSTStaxpayersonly.CompletethisitemonlyifyouhavechosentoenterorcontinueintheSTSatitemS1.

Completing this itemTocompletethisitemusetheamountsyoucalculatedforSTSdepreciationdeductionsinworksheet4onpage28.

At A Deduction for low-cost assetsitemP10onpage4ofyourschedule,writetheamountat(a)intheworksheet.

At B Deduction for general pool assets,writethetotaloftheamountsat(b)and(d)intheworksheet.

Atc Deduction for long-life pool assets,writethetotaloftheamountsat(c)and(e)intheworksheet.

stOPMakesureyouwritethedepreciationdeductionandnotthepoolbalanceat A , B andc .

P10

OtheR BusIness And PROFessIOnAl ItemsForitemsP11toP19youneedtofillinallitemsrelatingtoyourbusinessexpenses.

Ifyouhavemorethanonebusinessyoumustaddthefiguresforallbusinesses,irrespectiveofwhethertheyareprimaryornon-primaryproduction,andwriteonlyonefigureateachitem.

SSENISUBLIATERJDescriptionofactivity

KTaxOfficeuseonly l Soletrader

8

Partnership

mTypeofloss

ActIvItY 2

0008 , .00ONetloss ,0003 , .00nDeferrednon-commercialbusinesslossfromaprioryear ,

cReferenceforcode5

cOde

YnumBeR

A/YeAR

,FYourshareofdeferredlossesfrompartnershipactivities

.00

00081 ,gDeferredlossesfromsoletraderactivities

.00

ItemP9intheBusiness and professional items schedule for individuals 2007mustbecompletedbeforeyoucompletethisitem.

15 deferred non-commercial business losses

00001 , .00,Primaryproduction

deferredlosses I

0008 , .00,Non-primaryproduction

deferredlosses J


P11TRADEDEBTORSDid you have any trade debtors?

NO GotoitemP12 Trade creditorsbelow.

YES Readon.

You need to knowThisisthetotalamountowingtothebusinessattheendoftheyearforgoodsandservicesprovidedduringtheincomeyear,thatis,currenttradeandotherdebtors.


steP 1Workoutthetotalamountowingfromtradeandotherdebtors.Ifyouhavemorethanonebusiness,addupalltradeandotherdebtoramounts.

steP 2Writethetotalat e itemP11onpage4ofyourschedule.Donotshowcents.

P12TRADECREDITORSDid you have any trade creditors?

NO GotoitemP13 Total salary and wage expensesinthenextcolumn.

YES Readon.

You need to knowThisisthetotalamountowedbythebusinessattheendoftheyearforgoodsandservicesreceivedduringtheincomeyear,thatis,currenttradeandothercreditors.


steP 1Workoutthetotalamountowingtotradeandothercreditors.Ifyouhavemorethanonebusiness,addupalltradeandothercreditoramounts.

steP 2Writethetotalat F itemP12onpage4ofyourschedule.Donotshowcents.

P13TOTALSALARYANDWAGEEXPENSESDid you pay salary and wages as a business expense?

NO GotoitemP14Payments to associated personsonpage51.

YES Readon.

You need to knowSalary,wagesandotherlabourcostsactuallypaidorpayabletopersonsemployedinyourbusiness–excludingthoseformingpartofcapitalexpenditureorpaidforprivatedomesticassistance–usuallyaredeductible.However,youcannotbeanemployeeofyourbusiness.Paymentstoyouofsalary–wedeemthesepaymentstobeanallocationofprofits–arenotallowabledeductionsincalculatingyourincomeorloss.

IncludeanysalaryandwagecomponentofCost of salessuchasallowances,bonuses,casuallabour,retainersandcommissionspaidtopeoplewhoreceivedaretainer,andworker’scompensationpaidthroughthepayroll.

Alsoincludedirectandindirectlabour,holidaypay,locums,longserviceleave,lumpsumpayments,otheremployeebenefits,overtime,paymentsunderanincentiveorprofitsharingscheme,retiringallowancesandsickpay.Includeanysalaryorwagespaidtorelativesandotherrelatedentitiesbothhereandath itemP14onyourschedule.Excludeagencyfees,contractpayments,sub-contractpayments,servicefees,superannuation,managementfeesandconsultantfees.


steP 1Adduptotalsalaryandwageexpensesfromeachbusiness.

steP 2Writethetotalatg itemP13onpage4ofyourschedule.Donotshowcents.

steP 3Selectfromthefollowinglisttheletterthatmatchesthedescriptionoftheexpensecomponentwherethesalaryandwageexpenseshavebeenwhollyorpredominantlyreported:C AllincludedintheexpensecomponentCost of salesA AllincludedintheexpensecomponentAll other

expensesB IncludedintheexpensecomponentofbothCost of

salesandAll other expensesO IncludedinexpensecomponentsotherthanCost of

salesand/orAll other expenses.

steP 4PrinttheappropriateletterintheTYPEboxattherightoftheamountatg .

P11 – P13


P14PAYMENTSTOASSOCIATEDPERSONSDid you make any payments to associated persons as a business expense?

NO GotoitemP15Intangible depreciating assets first deductedinthenextcolumn.

YES Readon.

You need to knowTheseareamounts,includingsalary,wages,commissionsorallowancespaidtoyourrelatives.Italsoincludessuperannuationcontributionspaidforthebenefitofyourrelatives.

Youmustalsoincludeamountsofsalaryorwagespaidtoyourrelativesandpartnershipsinwhichyourrelativeisapartneratg itemP13onyourschedule.

Youneedtokeepthefollowingrecords:n fullnameofrelativeorrelatedpartnershipn age,ifunder18yearsoldn relationshipn natureofdutiesperformedn hoursworkedn totalremunerationn salaryorwagesclaimedasdeductions,andn otheramountspaid–forexample,retiringgratuities,

bonusesandcommissions.

Excessiveorunreasonablepaymentstoyourrelativeorapartnershipinwhichyourrelativeisapartnermaynotbedeductible.ThePSIrules(seeitemP1)alsolimitdeductionsforpaymentstoassociates.


steP 1Adduppaymentsmadetorelativesandrelatedpartnershipsfromeachbusiness.

steP 2Writethetotalath itemP14onpage4ofyourschedule.Donotshowcents.

P15INTANGIBLEDEPRECIATINGASSETSFIRSTDEDUCTED

STSTAXPAYERS–donotcompletethisitem.

Did you start to deduct the decline in value of any intangible depreciating assets?

NO GotoitemP16Other depreciating assets first deductedonpage52.

YES Readon.

You need to know

Thefollowingintangibleassetsareregardedasdepreciatingassets(aslongastheyarenottradingstock):n certainitemsofintellectualpropertyn computersoftware(orarighttousecomputersoftware)

thatyouacquire,developorhavesomeoneelsedevelopforyouruseforthepurposesforwhichitisdesigned(in-housesoftware)

n mining,quarryingorprospectingrightsandinformationn spectrumlicences,andn datacastingtransmitterlicences.

Adepreciatingassetthatyouholdstartstodeclineinvaluefromthetimeyouuseitorinstallitreadyforuseforanypurpose,includingaprivatepurpose.However,youcanonlyclaimadeductionforthedeclineinvaluetotheextentthatyouusetheassetforataxablepurpose,suchasforproducingassessableincome.

AtitemP15youneedtoshowthecostofallintangibledepreciatingassetsforwhichyouareclaimingabusinessdeductionfordeclineinvalueforthefirsttime.Ifyouhaveallocatedanyintangibledepreciatingassetswithacostoflessthan$1,000toalow-valuepoolfortheincomeyear,youalsoneedtoincludethecostofthoseassetsatitemP15.Donotreducethecostforestimatednon-taxableuse.

Expenditureonin-housesoftwarethatyouallocatedtoasoftwaredevelopmentpoolisnotshownatitemP15.

Formoreinformationondeclineinvalue,cost,low-valuepools,in-housesoftwareandsoftwaredevelopmentpools,seetheGuide to depreciating assets 2007.


steP 1Addupthecosts.

steP 2Writethetotalat I itemP15onpage4ofyourschedule.Donotshowcents.

Is the amount at I greater than $75,000?

NO GotoP16Other depreciating assets first deducted.

YES YouneedtocompleteandattachaCapital allowances schedule 2007.Formoreinformation,seetheCapital allowances schedule instructions 2007.

P14 – P15


P16OTHERDEPRECIATINGASSETSFIRSTDEDUCTED


Did you start to hold any other depreciating assets in 2006–07 for which you can claim a deduction for decline in value?

NO GotoitemP17Termination value of intangible depreciating assetsinthenextcolumn.

YES Readon.

You need to knowAdepreciatingassetthatyouholdstartstodeclineinvaluefromthetimeyouuseitorinstallitreadyforuseforanypurpose,includingaprivatepurpose.However,youcanonlyclaimadeductionforthedeclineinvaluetotheextentyouusetheassetforataxablepurpose,suchasforproducingassessableincome.

AtitemP16youneedtoincludethecostofalldepreciatingassets(otherthanintangibledepreciatingassets)forwhichyouareclaimingabusinessdeductionforthedeclineinvalueforthefirsttime.

Ifyouhaveallocatedanydepreciatingassetswithacostoflessthan$1,000toalow-valuepoolfortheincomeyear,youalsoneedtoincludethecostofthoseassetsatitemP16.Donotreducethecostforestimatednon-taxableuse.

Formoreinformationondeclineinvalue,costandlow-valuepools,seetheGuide to depreciating assets 2007.


steP 1Addupthecosts.

steP 2Writethetotalat J itemP16onpage4ofyourschedule.Donotshowcents.

Is the amount at J greater than $75,000?

NO GotoP17Termination value of intangible depreciating assetsinthenextcolumn.

YES YouneedtocompleteandattachaCapital allowances schedule 2007.Formoreinformation,seetheCapital allowances schedule instructions 2007.

P17TERMINATIONVALUEOFINTANGIBLEDEPRECIATINGASSETS


Did you stop holding or using any intangible depreciating assets in 2006–07?

NO GotoitemP18Termination value of other depreciating assetsonpage53.

YES Readon.

You need to know

Donotshowatthisquestionanyconsiderationyoureceivedduringtheincomeyearinrelationtoin-housesoftwareforwhichyouhaveallocatedexpendituretoasoftwaredevelopmentpool.

Formoreinformationonterminationvalue,in-housesoftwareandsoftwaredevelopmentpools,seetheGuide to depreciating assets 2007.

SeeitemP15onpage51formoreinformationaboutintangibledepreciatingassets.

Includetheterminationvaluesforintangibledepreciatingassets–includingintangibleassetsallocatedtoalow-valuepool–thatyoustoppedholdingorusingduringtheyear(forexample,assetssold,lostordestroyed).

Generally,theterminationvalueistheamountyoureceivedoraredeemedtohavereceivedinrelationtotheassetthatyoustoppedholdingorusing.Itincludesthemarketvalueofanynon-cashbenefitssuchasgoodsandservicesyoureceivefortheasset.


steP 1Addupanyamountsyoureceivedoraredeemedtohavereceivedforallintangibledepreciatingassetsthatyoustoppedholdingorusinginyourbusiness,otherthan:n assetsallocatedtoageneralSTSpooloralong-lifeSTS

poolinaprioryearn low-costassetsforwhichanimmediatedeductionhas

beenallowedundertheSTSrulesn in-housesoftwareforwhichyouallocatedexpenditure

toasoftwaredevelopmentpool,andn assetsfallingwithintheprovisionsrelatingto

investmentsinAustralianfilms.

steP 2Writethetotalatd itemP17onpage4ofyourschedule.Donotshowcents.

P16 – P17


P18TERMINATIONVALUEOFOTHERDEPRECIATINGASSETS


Did you stop holding or using any other depreciating assets in 2006–07?

NO GotoitemP19Trading stock electioninthenextcolumn.

YES Readon.

You need to know

AtitemP18youincludetheterminationvaluesforotherdepreciatingassets–includingassetsallocatedtoalow-valuepool–thatyoustoppedholdingorusingduringtheincomeyear(forexample,assetssold,lostordestroyed).

Generally,theterminationvalueistheamountyoureceivedoraredeemedtohavereceivedinrelationtotheassetthatyoustoppedholdingorusing.Itincludesthemarketvalueofanynon-cashbenefitssuchasgoodsandservicesyoureceivedfortheasset.

Formoreinformationonterminationvalue,seetheGuide to depreciating assets 2007.


steP 1Adduptheamountsyoureceivedoraredeemedtohavereceivedforalldepreciatingassetsthatyoustoppedholdingorusinginyourbusinessotherthan:n intangibledepreciatingassetsn assetsallocatedtoageneralSTSpooloralong-life

STSpoolinaprioryearn low-costassetsforwhichanimmediatedeductionhas

beenallowedundertheSTSrulesn buildingsorstructuresforwhichadeductionisavailable

underthecapitalworksprovisions,andn assetsfallingwithintheprovisionsrelatingto

investmentsinAustralianfilms.

steP 2Writethetotalat K itemP18onpage4ofyourschedule.Donotshowcents.

P19TRADINGSTOCKELECTIONHave you made a trading stock election?

NO GotoCheck that you have…below.

YES Readon.

You need to knowIfyouhavevaluedtradingstockonhandattheendoftheyearofincomeatanamountthatislessthanthelowestamountavailableusingoneofthevaluationmethodsatClosing stockonpages19–20,youmustnotifytheCommissioner.

Completing this itemIfyoumustnotifytheCommissioneraboutyourtradingstockelection,printYat P itemP19onpage4ofyourschedule.Otherwiseleave P blank.

CHECKTHATYOUHAVE… writtenyourtaxfilenumberandyourfullnameonpage1ofyourBusiness and professional items schedule for individuals 2007

writtenthecorrectamountonyourscheduleforeachitemthatappliestoyou

correctlytransferredtheamountat A Net PSIitemP1onyourBusiness and professional items schedule for individuals 2007to A item13onpage9ofyourtaxreturn(supplementarysection)

correctlytransferredtheamountsat Y and Z NET INCOME OR LOSS FROM BUSINESSitemP8onyourBusiness and professional items schedule for individuals 2007to B andc (respectively)item14onpage10ofyourtaxreturn(supplementarysection)

signedanddatedyourBusiness and professional items schedule for individuals 2007andattachedittopage3ofyourtaxreturn

completedandattachedtheIndividual PAYG payment summary schedule 2007topage3ofyourtaxreturn,ifyoureceivedbusinessincomethatwassubjecttowithholding

keptyourrecordstoproveyourclaims,whererequired.

P18 – P19


notes

INTERNETnFor general tax information and to download

publications and rulings, visit www.ato.gov.au

PUBLICATIONSPublications referred to in this guide are:nApplication for a private ruling on the exercise of the

Commissioner’s discretion for non-commercial business loss (NAT 5806)

n Blackhole expenditure: business related expenses (available on our website)

nCapital allowances schedule instructions 2007 (NAT 4089–6.2007)

n Deductions for prepaid expenses 2007 (NAT 4170–6.2007)n Fringe Benefits Tax Assessment Act 1986n Guide to capital gains tax 2007 (NAT 4151–6.2007)nGuide to depreciating assets 2007 (NAT 1996–6.2007)n Information for primary producers 2007 (NAT 1712–6.2007)nLaw Administration Practice Statement PS LA 2001/6

– Home office expenses: diaries of use and calculation of home office expenses

nLaw Administration Practice Statement PS LA 2003/8 – Taxation treatment of expenditure on low cost items for taxpayers carrying on a business

n Non-commercial losses: overview – fact sheet (NAT 3379)

n Non-commercial losses: partnerships – fact sheet (NAT 3385)

nPrivate ruling application form (non-tax professionals) (NAT 13742)

n Private ruling application form (tax professionals) (NAT 13043)

nRecord keeping for small business (NAT 3029)nSimplified tax system: simplified trading stock rules

(NAT 4107)nTax basics for small business (NAT 1908)nTaxation Ruling TR 92/18 – Income tax: bad debtsnTaxation Ruling TR 93/30 – Income tax: deductions for

home office expensesnTaxation Ruling TR 96/7 – Income tax: record keeping –

section 262A – general principlesnTaxation Ruling TR 97/11 – Income tax: am I carrying

on a business of primary production?nTaxation Ruling TR 97/23 – Income tax: deductions

for repairsnTaxation Ruling TR 2001/14 – Income tax: Division 35:

non-commercial business lossesn Taxation Ruling TR 2002/6 – Income tax: Simplified Tax

System eligibility – grouping rules (STS affiliate, control of non-fixed trusts

nTaxation Ruling TR 2002/11 – Income tax: Simplified Tax System eligibility – STS average turnover

nTaxation Ruling TR 2003/10 – Income tax: deductions that relate to personal services income

nTaxation Ruling TR 2006/3 – Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business

nTaxPack 2007 (NAT 0976–6.2007)nTaxPack 2007 supplement (NAT 2677–6.2007)nTaxpayers’ charter – what you need to know

(NAT 2548)nThe simplified tax system – a guide for tax agents

and small businesses (NAT 6459)nThin capitalisation guide (NAT 4461)nThin capitalisation schedule 2007 (NAT 6458–6.2007)

To get any publication referred to in this guide:nvisit our website at www.ato.gov.au/publications nphone our Publications Distribution Service on

1300 720 092, ornvisit one of our shopfronts.

INFOLINESWe can offer a more personalised service if you provide your tax file number (TFN) when you phone us.nBusiness 13 28 66

General business tax enquiries including GST rulings, Australian business number (ABN), pay as you go (PAYG) instalments, business deductions, activity statements (including lodgment and payment), accounts and business registration (including ABN and TFN), dividend and royalty withholding tax

nPersonal tax 13 28 61 Individual income tax and general personal tax enquiries

nSuperannuation 13 10 20nSuper Choice 13 28 64

Information about choice of superannuation funds and the role of the employer

nTax agents 13 72 86nFax 13 28 60

To get information about business, tax reform, superannuation, excise duty, fuel schemes, not for profit or personal tax sent to your fax machine, phone 13 28 60 and follow the instructions.

OTHER SERVICESnTranslating and Interpreting Service 13 14 50

If you do not speak English well and want to talk to a tax officer, phone the Translating and Interpreting Service for help with your call.

nHearing or speech impairment If you are deaf or have a hearing or speech impairment, you can phone the Tax Office through the National Relay Service: – If you are a TTY or modem user phone 13 36 77

and ask for the number you want. For 1800 free call numbers, phone 1800 555 677 and ask for the number you want.

– If you are a Voice-only (speak and listen) user phone 1300 555 727 and ask for the number you want. For 1800 free call numbers, phone 1800 555 727 and ask for the number you want.

ne-Record A free, electronic record-keeping software product. Visit www.ato.gov.au to download e-Record or phone 1300 139 051 to order a CD.

MORE INFORMATION

Your alternative to TaxPack 2007

Lodge online using e-taxMost refunds in 14 days User-friendly step-by-step process Help is available online or over the phone Safe and secure

Go to www.ato.gov.au

business and professional items 2007

Documents