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My husband and I recently had a business which only lasted 18 months (wrong timing). We have poured alot of money into this business and find it hard to believe we will not receive anything back tax wise. We are not really sure how this works. Can somebody please explain this to me like i'm a 2 year old. Is he able to claim anything back through his personal tax?
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I am but a simple lawyer so I can't give tax advice, you need to talk to an accountant. The question of what you can claim back with the business is really an area where you need to talk to an expert and in this case an accountant. I would be cautious about taking advice from someone who isn't an accountant because you don't want to get tax issues wrong because then you do need to talk to a lawyer. :)
Hi Natasha
What structure was the business run under? i.e. Sole trader, partnership, trust or company.
The type of structure used determines the recoupement of losses.
Hi Natasha,
I had a business under a family trust structure which lost a significant amount of money over 10 years ago. Whilst I worked PAYG, that income was unrelated to the company and trust and I could not claim any deductions or offset losses from the business. When I started up a new business trading in the company name, I was then able to offset profit earned against prior tax losses. Capital losses are different again and can only be offset against future capital gains of the company.
If you plan to try again in business, it can be worth maintaining the ongoing company accounts each year to carry forward your losses to be used in later years. This is definitely a discussion that you and your husband need to have with your accountant as it will cost around $1500-$2500 per year.
Best of luck
Scott
We had it as a Pty Ltd company
Hi Natasha
In the case of a Pty Ltd company, those losses are quarantined in the company and can only be used to offset future income of the company. Unfortunately they cannot be claimed or offset in your personal tax returns.
You can however carry the losses forward indefinitely and if you were to use the company to carry a business or investment vehicle, you can use the losses first before paying taxes on profits.
If the losses are of capital nature then they can only be offset by capital gain made in the future.
So basically we no longer have the company and have spent so much money trying to keep it going and are now left with nothing and unable to claim anything. Why do small businesses even decide to give it a go? Do you know how we go about de-registering this business?
Small businesses give it a go as there are lots of rewards (financial and non-financial) when we get it right.
About deregistration - you can do a voluntary deregistration with ASIC with Form 6010.
You will also need to cancel all registrations with ATO if not already done.