The Government has announced that it will amend the tax treatment of boat hire arrangements to allow taxpayers who cannot demonstrate that they are actually carrying on a business using a boat to claim deductions for costs related to their boating activity.
The current law imposes a test for allowing deductions that are related to income-earning activities associated with the use of boats whereby a taxpayer must be actually carrying on a business using the boat and not merely generating passive income.
The measure will allow taxpayers who cannot demonstrate that they are carrying on a business using a boat to:
- deduct expenditure relating to their boating activity up to the level of income generated from their boating activity; and
- allow any excess deductions to be carried forward and deducted against income from that boating activity in future years.
The measure will ensure that where taxpayers generate an income stream using their boat, they are not unfairly taxed while maintaining the restrictions on using the tax system to subsidise private use of boats.
The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.
Supporting Information
Why is this important?
- The measure will ensure that where taxpayers generate an income stream using their boat, they are not unfairly taxed while maintaining the restrictions on using the tax system to subsidise private use of boats.
Who will benefit?
- The proposal will benefit boat owners who cannot meet the business test, whilst taxpayers who are able to satisfy the business test will remain unaffected.
What funding is the Government committing to the initiative?
- The total cost to revenue of implementing this proposal is estimated at $17 million over the forward estimates period.
What have we done in the past?
- The current income tax law imposes a test for allowing deductions that are related to income-earning activities associated with the use of boats. A taxpayer must be actually carrying on a business using the boat and not merely generating passive income. Currently, where a business cannot be demonstrated, all receipts from the activity must be returned as income and no expenses can be offset against that income.
When will the initiative conclude?
- The proposal is ongoing.