Document ID: chunk:federal_register_of_legislation:C2007A00078:clause:2_1:p1
Version: federal_register_of_legislation:C2007A00078
Segment Type: clause
Provision Reference: sch 2 cl 1 (pt 1/3)
Character Range: 7920–10562

1  After section 26‑45
Insert:

26‑47  Non‑business boating activities

Object

 (1) The object of this section is to improve the integrity of the taxation system by preventing deductions from boating activities that are not carried on as a *business being offset against other assessable income.

Rule

 (2) This Act applies to you as if so much of the amounts relating to using or *holding boats that you could otherwise deduct for an income year as exceeds your assessable income from using or holding boats for that year:
 (a) were not deductible for that income year; and
 (b) were an amount (a quarantined amount) relating to using or holding boats that you can deduct for the next income year.

Note: A quarantined amount may be reduced under subsection (5) (for boat capital gains), reduced under subsection (7) (where you deduct part of a quarantined amount under subsection (6) for boat business profits), reduced under subsection (8) (about exempt income) or affected by subsection (10) (about bankruptcy).

Example: Ian does not use his boat in a business. In Year 1, Ian would be able to claim $100,000 in deductions for the boat (but for this subsection), including interest, depreciation and running costs. He earns only $40,000 of income from the boat. He can only deduct $40,000. He carries the remaining $60,000 forward to Year 2 (the quarantined amount).

In Year 2, Ian has $95,000 of expenses and $30,000 of income for the boat. He can deduct $30,000. The quarantined amount is now $125,000: the quarantined amount from Year 1 plus the excess of expenses over income from Year 2.

In Year 3, Ian has $60,000 of expenses and $150,000 of income from the boat. The expenses from Year 3 plus the quarantined amount is $185,000. Therefore, Ian claims a deduction of $150,000 and carries forward $35,000 to Year 4.

Exception: business use

 (3) The rule in subsection (2) does not apply to amounts that are attributable to one or more of the following:
 (a) *holding a boat as your *trading stock;
 (b) using a boat (or holding it) mainly for letting it on hire in the ordinary course of a *business that you *carry on;
 (c) using a boat (or holding it) mainly for transporting the public or goods for payment in the ordinary course of a business that you carry on;
 (d) using a boat for a purpose that is essential to the efficient conduct of a business that you carry on.

Note: Even if this exception applies to you, you may still have to quarantine losses under Division 35 (deferral of losses from non‑commercial business activities).

Exception: fringe benefits

 (4) The rule in subsection (2) does not apply to so