Document ID: chunk:federal_register_of_legislation:C2004A00684:clause:1_3:p2
Version: federal_register_of_legislation:C2004A00684
Segment Type: clause
Provision Reference: sch 1 cl 3 (pt 2/5)
Character Range: 4581–7242

income (if any) from the business activity for that year, or your share of it, this Act applies to you as if the excess:
 (a) were not incurred in that income year; and
 (b) were an amount attributable to the activity that you can deduct from assessable income from the activity for the next income year in which the activity is carried on.

Note: There are modifications of this rule if you have exempt income (see section 35‑15) or you become bankrupt (see section 35‑20).

Example: Jennifer has a salaried job, and she also carries on a business activity consisting of selling lingerie.

 Jennifer starts that activity on 1 July 2002, and for the 2002‑03 income year, the activity produces assessable income of $8,000 and deductions of $10,000. The activity does not pass any of the tests and the discretion is not exercised so the $2,000 excess is carried over to the next income year in which the activity is carried on.

 For the 2003‑04 income year, the activity produces assessable income of $9,000 and deductions of $10,000 (excluding the $2,000 excess from 2002‑03). Again, no tests passed and no exercise of discretion.

 $3,000 is carried over to the next income year (comprising the $1,000 excess for the current year, plus the previous year's $2,000 excess) when the activity is carried on.

Grouping business activities

 (3) In applying this Division, you may group together *business activities of a similar kind.

Exceptions

 (4) The rule in subsection (2) does not apply to a *business activity for an income year if:
 (a) the activity is a *primary production business, or a *professional arts business; and
 (b) your assessable income for that year (except any *net capital gain) from other sources that do not relate to that activity is less than $40,000.

 (5) A professional arts business is a *business you carry on as:
 (a) the author of a literary, dramatic, musical or artistic work; or

Note: The expression "author" is a technical term from copyright law.  In general, the "author" of a musical work is its composer and the "author" of an artistic work is the artist, sculptor or photographer who created it.
 (b) a *performing artist; or
 (c) a *production associate.

35‑15  Modification if you have exempt income

 (1) The rule in section 35‑10 may be modified for an income year if you *derived *exempt income in that year.

 (2) Any amount to which paragraph 35‑10(2)(b) would otherwise apply for an income year for you is reduced by so much of your *net exempt income as is not applied for that income year under section 36‑10 or 36‑15 (about tax losses). This reduction is made before you apply the paragraph 35‑10(2)(b)