How many years in succession can a tax loss be claimed for small business before Tax Office queries claim?
An income tax loss, cgt loss or a deferred non-commercial loss ? A loss arising from a small business may be affected by non-commercial loss rules which dictate how long it carries forward for and when it may either be used or it terminates. Incorrect completion of the NCL fields in a return will trigger ATO exceptions and review of the issue. A CGT loss can be carried forward indefinitely and only can be used to offset a CGT gain. An income tax loss carries forward indefinitely but must be reduced by minor income. The $18K tax free threshold should be ignored since even $100 of income affects the value of the loss. All losses carried forward may require substantiation back to when the loss was incurred and for several years after its use.
As long as the cash lasts. Obviously a business that makes losses and the owners enjoy a good lifestyle and have low docs loans being serviced (!!) has a vastly elevated risk of being asked to explain lifestyle and cash economy compliance etc It amajor area of focus by a variety of agencies that incldue the ATO. It was one of the ways the Cranston payroll fraud matters were detected. Buying high end luxury goods, no apparent major source of wealth.....closer review of associated businesses and common address use showed debts and so on. Thats at the top end but small busieness eg smash repairer that earns no salary over years but have a $1.5m home and paying down debts etc can arose curiosity. ATO also have data from banks and other areas that they can match. eg Bank deposits to a business of $4m and reported sales of $400K can lead to enquiries.
