Private ruling: Entrepreneur's tax offset
Published: February 2012
Ruling period: 1 July 2010 to 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to claim the entrepreneur's tax offset under section 61-505 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: no

Relevant facts and circumstances: You are a private company. In the 2011 income year your turnover was below $75,000. This income was interest earned from cash deposits held by banks. You did not undergo any business activity in the 2011 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 61-500 | Income Tax Assessment Act 1997 section 328-10 | Income Tax Assessment Act 1997 section 995-1(1)

Reasons for decision: Summary: You are not able to apply the entrepreneur's tax offset in the 2011 income year. | Detailed Reasoning - Detailed reasoning: Entrepreneurs Tax Offset Subsection 61-505(1) of the ITAA 1997 states: You are entitled to a tax offset for an income year if: · you are an individual or a company; and · you are a *small business entity for the year; and · your aggregated turnover for the year is less than $75,000; and · you have *net small business income for the year. Essentially, you are a small business entity for an income year if you carry on a business and your aggregated turnover in the current or prior year was less than $2 million. (Section 328-110 of the ITAA 1997). | Detailed Reasoning - Carrying on a business: Section 995-1(1) of the ITAA 1997 defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'. In your case, you are a company who has previously been a small business entity. In the 2010-11 income year you were not carrying on a business and all income was received from 'passive' investments, being interest on bank deposits. You are therefore not eligible for the entrepreneur tax offset in the 2010-11 income year.

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