7Overall operating loss to be used to reduce ordinary income

7 Overall operating loss to be used to reduce ordinary income

(1) Subject to the limits set out in section 8, a person’s ordinary income for a tax year is to be reduced by the amount of the overall loss (the overall operating loss) of the farm enterprise in relation to which the person claimed farm household allowance and the related businesses of the farm enterprise. (2) The amount of the overall operating loss of the farm enterprise and related businesses of the farm enterprise is the amount worked out using the following method statement.

Method statement

Step 1. Identify for the person the farm enterprise in relation to which the person claimed farm household allowance and each related business of the farm enterprise.

Step 2. Work out for the tax year the revenue of the farm enterprise and each related business of the farm enterprise.

For the purposes of this step:

(a) if the farm enterprise or related business is carried on by more than one entity—assume that only one entity is carrying on the farm enterprise or related business; and

(b) if the farm enterprise or related business is carried on by a company or trust—the revenue of the farm enterprise or related business is the company’s or trust’s gross ordinary income from the farm enterprise or related business as worked out under section 1208 of the Social Security Act without any reductions; and

(c) if the farm enterprise or related business is carried on by an entity other than a trust or company—the revenue of the farm enterprise or related business is the entity’s gross ordinary income from the farm enterprise or related business worked out under Part 3.10 of that Act without any reductions; and

(d) if the farm enterprise or related business is carried on by a partnership—treat the partnership as a person for the purpose of applying paragraph (c).

Step 3. Sum the amounts worked out under step 2.

Step 4. Work out for the tax year the outgoings for the farm enterprise and each related business of the farm enterprise.

For the purposes of this step:

(a) if the farm enterprise or related business is carried on by more than one entity—assume that only one entity is carrying on the farm enterprise or related business; and

(b) if the farm enterprise or related business is carried on by a company or trust—the outgoings of the farm enterprise or related business are the reductions that can be made under section 1208A or 1208B of the Social Security Act from the company’s or trust’s gross ordinary income from the farm enterprise or related business; and

(c) if the farm enterprise or related business is carried on by an entity other than a trust or company—the outgoings of the farm enterprise or related business are the reductions that can be made under Division 1A of Part 3.10 of the Social Security Act from the entity’s gross ordinary income from the farm enterprise or related business; and