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The Government will allow taxpayers who cannot demonstrate that they are actually carrying on a business using a boat to claim deductions for the costs associated with hiring out their boats. This measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

The current income tax law imposes a strict 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 carrying on a business cannot be demonstrated, all receipts from the activity must be returned as income and no expenses can be set off against that income.

This measure will allow taxpayers who are hiring out a boat to deduct expenditure relating to their boating activity against the income derived for hiring which is also taxable. Taxpayers will be allowed to carry forward any excess deductions and deduct them against income generated from that boating activity in future years.

For a copy of the Assistant Treasurer's press release No 22, 9 May 2006, go here

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