The Federal Government has officially closed a loophole that allows owners of non-commercial businesses such as holiday homes and hobby farms to claim tax deductions.
The Government says the changes will effect 11,000 mostly high income earners who “exploit parts of the tax system to unfairly minimise or avoid their tax obligations” by claiming deductions on non-commercial businesses that “are no more than hobbies or lifestyle choices”.
Under current rules, personal income tax deductions can be claimed against salary, wage and other income for activities like running hobby farms that may not ever make a profit.
To address this loophole, from 1 July taxpayers with adjusted taxable incomes of over $250,000 will only be able to deduct those expenses against the income from the non-commercial business activity.
“The new measures will save around $880 million in extra revenue over the forward estimates and will help ensure everyone pays their fair share of tax,” Federal Treasurer Wayne Swan says.
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