SYDNEY SEMINAR PREVIEW
HOT TOPICS IN HORSE TAX
Over the many years I’ve been consulting to the horse
industry, the NSW industry has easily been our greatest growth
region – in fact I now consider myself an “honorary” New
South Welshman, given how much time I now spend up there!
it’s always a pleasure to get up to Sydney
and update the industry on the “hot topics” in
use this issue of the NSWROA Times newsletter to provide
a sneak preview of what I’ll cover at the
seminar and maybe you’ll consider a must to attend
once you have worked through these topics.
New horse loss rules
Introduced in the 2009 Budget, these
rules are aimed at making it more difficult for high income
earners to be able to claim
their horse losses immediately, given that a successful private
ruling application is now required.
I’ll provide an
update as to how the ATO are handling these ruling applications
and pass on “tips” that
will enhance your chances of a successful application.
Horse Tax Planning
We’ve just gone through an extended
period of droughts, equine viruses, floods etc and there
are tax concessions
that can be used to reduce or defer tax and preserve working
capital that invariably suffers as a result of these occurrences,
of which I’ll discuss at length.
can also be used to acquire necessary a horse business property
due primarily to the change in
the borrowing rules a few years ago, and we’ll be exploring
the steps involved to make this happen and other related
issues. I’ll also discuss what other horse assets a
super fund can acquire.
Capital Gains Tax (“CGT”)
Did you know
there are special CGT rules relating to hobby owners and
breeders and if proper structuring takes place
CGT can be avoided on the sale of a horse?
cover what items are included in the CGT cost base when a
horse is sold – you won’t want
to miss anything you are rightfully entitled to! The ATO
released a document a few years ago on this topic which now
greatly assists in this area.
We also discuss the core issues
to do with GST, especially as to what the current registration
rules are and some of
the “silent” GST issues that affect horse owners
Breeding property taxation
So many breeders with properties
may “carve-off” some
of their properties for sale, often with a significant profit
purpose, e.g. future development. Do you know if this is
subject to CGT and/or GST? How much will you pay? What costs
can be included to reduce the profit?
Income tax issues surrounding
the ownership of your breeding property are also raised,
for instance how much of your property
is subject to CGT when sold? How much interest can be claimed
on a property loan?
Tax cases and Budget update
The landscape of the horse tax
world is forever changing due to the principles that arise
from the countless horse
tax cases regularly decided. For instance, there was a landmark
GST decision a few years ago called “Swansea”,
the principles in this case making it far easier for otherwise “hobby” breeders
to register for GST.
The Federal Budget is handed down only
a month or so before the seminar, thus I always like to update
the industry on
what changes or proposals are relevant, for example, have
the “write-off” rules changed? Are trusts going
to be taxed differently? Are there now extra concessions
for primary producers as a result of the recent floods etc?
year we’ll also comment on the new project that
the ATO have just embarked upon re the proper claiming of
tax losses by what is known as SME, i.e. “Small Medium
Enterprise”. Due to the vagaries of the racing and
breeding industry, tax losses are very common, especially
in the early years, thus the industry should always take
special notice if the ATO launches special projects focusing
on tax losses.
For the record, the ATO defines an SME as:
High wealth individuals, including those in control of more
than $30m in net assets.
Wealthy Australians with net wealth of $5m to $30m
Non-Profit and Government Organisations
FBT across all market segments
AN SME (Small to Medium Enterprise) is an enterprise with
annual turnover of $2m to $250m.
Always a crowd pleaser at my seminars, there
is so much to say about these special horse stock concessions
and mares), yet industry players (and their advisers!)
seem to know so little about them, especially in relation
Now that we have new NCL loss rules for
high income earners to deal with (see above), it is well
worth discussing when
applying these rules could be detrimental to a breeder’s
I work through a comprehensive list of deductions
that every industry player should know about, always updated
50% Tax Break and Racing
These generous deductions relating
to business plant were introduced in the midst of the GFC
and are still relevant
for the 2010 and 2011 tax years. How do they relate to the
horse industry? Are the “big ticket” infrastructure
items on a breeding property eligible for these concessions?
Can racehorses attract this tax break? We work through these
issues in detail.
Business v Hobby – what now?
The last 5-10 years has
seen the ATO take an unprecedented interest in the horse
industry, highlighted by a special
industry audit, the introduction of the new NCL loss rules
and an escalation in industry BAS verification activities.
These activities have certainly bought the
issue of “Business
v Hobby” into sharp focus and it’s been quite
interesting to see how the ATO have reprioritised and changed
the main “business” factors. It’s always
well worth covering these at my seminars, especially for
the many accountants who invariably attend.
You are welcome
to contact Paul Carrazzo if you wish him to clarify or
expand upon any of the matters raised in this article. Contact
for Paul appear under.
DISCLAIMER: Any reader intending to
apply the information in this article to practical circumstances
interpretation and the information’s applicability
to their particular circumstances with an accountant specialising
in this area.
CARRAZZO CONSULTING CPAs
22 BLACKWOOD ST, NORTH MELBOURNE VIC 3051
TEL: (03) 9329 7044
FAX: (03) 9329 8355
MOB: (0417) 549 347
Web Site: www.carrazzo.com.au