Creative Deductions - Somersoft sounding board

[XBenX]

Its almost 1am - I dont know how creative this will be or whether it will be dribble =P~~~~

I have a knack for choosing sports that are healthy for the mind body and soul (provided I dont break something)

The problem is they are usually extremely cancerous to the hip pocket =)

As luck would have it wakeboard is cheaper than snowboarding... well except

The question... how can I make my two sports a tax deductible expense...

The expenses are of two types;

1/. Capital expense - I have to buy a boat (significant depn dedn), boards etc - I have most of my snowboarding gear but it gets replaced regularly
2/. Travel/Accomodation costs
3/. Repairs/Fuel/Maintainence

The brain storming;

a/. Sponsorship - A little bit of a twist on the normal sponsor where manufacturers give you free gear - My fellow boardsport addict (FBA) and I both have a company - we sponsor each other to ride - wear advertising etc. we hand each other a cheque for the endorsement - whatever you wish to term it.

Think Cigarette companies sponsoring motor racing, one.tel sponsoring skiing etc..

That sponsorship forms part of the legitmate advertising expense of the business

- can FBA Pty Ltd sponsor XBenX?
- does it have to be in a related industry?
- do you have to show a seperation between FBA Pty Ltd and XBenX (ie could a company of which I am a director sponsor me)

b/. Work in the industry - working and riding dont really mix for me - I havent done it in the past and Id like to avoid it - but I could always get some work instructing (snowboarding anyhow) if it allowed my tax deductions for my o/s trips - not sure what is possible here?

c/. Operate a business in the industry - Again not my choosen path - Id rather operate a business in other industries - I could do this but I would struggle to offset the costs of my sports and for it to be a legitmate business turning a profit... Ie Id fear it would look like a hobby farm...

d/. ????

Thoughts from the floor?

I should make this a poll - The only option - XBenX is crazy and should accept that his sports are non deductible and he is being greedy...

Anyone thinking outside the square and think any of this could work or got any other suggestions?

 

[geoffw]

Some ideas about another sport in http://www.somersoft.com/forums/showthread.php?t=16626

 

[MasterInvestor]

What about teaching your art?

You could advertise for students, maybe at a high rate. If you can't find many, then too bad.

But be careful about running a business at a loss.

You could also buy a property down there near the snow, so that should enable a few trips to be claimed.

The boat could be used for chartering for a daily fee. Maybe your mates could rent it for a nominal sum.

 

[quoll]

Nice idea Ben

I've look at some business's recently and noticed that a lot of the automotive ones have sponsored cars. They seem to sponsor themselves or I should say the company sponsors the owner. At least that's the way it seems. Lot of money goes into motor sports.

I need to buy more windsurfing gear, couple of new boards $2k each, 5 new sails $500 each, new masts x2 at $350 each, mounts up quick. I reckon $5k per year would set me up OK, some of the gear I have is 15years old.

Setting up a hire business would be great. Sporting goods hire.

Have you had a look at the ATO's website?

cheers
quoll

 

[quoll]

Fount this on the ATO site
link to motorbike racing sponsorship

Income Tax
Deductions and expenses: motor bike sponsorship»

Issue

Can the taxpayer claim an income tax deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses in sponsoring motor bike racing?

Decision

Yes. The taxpayer is entitled to claim an income tax deduction for expenses in sponsoring motor bike racing under section 8-1 of the ITAA 1997.

Facts

The taxpayer operates a business as a sole trader.

The taxpayer would like to sponsor motor bike riding in the belief that the exposure will benefit his business in the form of advertising. The taxpayer will provide «sponsorship» for up to four riders. The taxpayer will pay the costs of purchasing motor bikes and other costs such as fuel, repairs, spare parts and safety clothing. The motor bikes and a support vehicle as well as the clothing and caps worn by the riders will carry the taxpayer's business name.

In addition, the taxpayer intends to hand out business cards at the motor bike events to stimulate interest in his business through his position as sponsor of the sporting event.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are necessarily incurred in gaining or producing exempt income.

The expenses associated with the taxpayer's «sponsorship of motor bike riding are deductible under section 8-1 of the ITAA 1997. They are in the nature of advertising expenses and are directed to enhance the income producing activities of the taxpayer's business and are not excluded on the basis of being capital or of a private or domestic nature.

Date of decision: 20 December 2001

Year of income: Year ended 30 June 2001
Year ending 30 June 2002
Year ending 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
section 8-1

Keywords
Advertising & promotion expenses
Deductions and expenses

Date of publication: 28 February 2002

ISSN: 1445-2782

Now all you need is a business that will benefit / increase sales by sponsoring you.

cheers
quoll

 

[XBenX]

Got one =)

Hrmmmm spose I should just present my ideas to the accountant....

Had hoped to have nutted things out a bit better, the ideas seem to raise more qns rather than providing answers!

 

[Steve KKK]

Here are a few things I thought of that could make your tax-deductible case a little bit more feasable. It's just a bit of brainstorming and in no way tries to be the be all and end all solution:

If you plan on sponsoring each other, find out how much other sponsorship deals are in the same sport for the same exposure. ie, do you attend televised competitions or local non-media-attracting events?

Incorporate any sponsorship deals with other advertising avenues so that it is part of your overall marketing plan for your business and try to devise a plan that actually would generate additional income (and may even pay for the sponsorship itself).
It would be much harder to prove that the sponsorship deal was to help generate income for the business if you can't actually show any increase in income.

Can you write? If so, submit articles to publications. Are you web-literate? Develop a website for boarder and fans, increase the traffic and then look for advertising for the website.

Look at having your business (preferably a company) own the capital equipment - boat, etc. There may be Fringe Benefits Tax involved if you get a personal benefit from the equipment, so weight up the pros and cons. Maybe your company owns or leases FBA's boat and FBA owns or leases yours.

If boarding is your passion, then it shouldn't be too difficult to do some income-producing activity relating to help you maintain your lifestyle. Afterall there is more incentive to succeed in such a business if you want to keep doing what you love.

Just my brainfart for the day!
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[XBenX]

Here are a few things I thought of that could make your tax-deductible case a little bit more feasable. It's just a bit of brainstorming and in no way tries to be the be all and end all solution:

If you plan on sponsoring each other, find out how much other sponsorship deals are in the same sport for the same exposure. ie, do you attend televised competitions or local non-media-attracting events?

Incorporate any sponsorship deals with other advertising avenues so that it is part of your overall marketing plan for your business and try to devise a plan that actually would generate additional income (and may even pay for the sponsorship itself).
It would be much harder to prove that the sponsorship deal was to help generate income for the business if you can't actually show any increase in income.

Can you write? If so, submit articles to publications. Are you web-literate? Develop a website for boarder and fans, increase the traffic and then look for advertising for the website.

Look at having your business (preferably a company) own the capital equipment - boat, etc. There may be Fringe Benefits Tax involved if you get a personal benefit from the equipment, so weight up the pros and cons. Maybe your company owns or leases FBA's boat and FBA owns or leases yours.

If boarding is your passion, then it shouldn't be too difficult to do some income-producing activity relating to help you maintain your lifestyle. Afterall there is more incentive to succeed in such a business if you want to keep doing what you love.

Just my brainfart for the day!
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Thanks for all the tips...

I dont want to find an income producing activity relating to boarding that will help me maintain lifestyle, what I want to do is minimise my tax...

Atm I spend a fair few $$$ on these sports - to be able to make them tax deductible (even partially) would help my tax situation...

Yes it would be easy for me to make some $$$ out of boarding... but thats not the point, I enjoy riding for myself, not instructing, not working in the industry...

Its not your usual I spend $$$ on computers so buy a laptop and grab a double deduction, or I spend $$$ on a car so lease, hire purchase, etc and make those expenses tax deductible - there isnt a wealth of information out there from people who have already tried it...

The ATO search facility (thanks Dunc?) has found a few cases but still left me with my original questions.

Cheers for all the thoughts guys, keep em coming...

 

[geoffw]

I dont want to find an income producing activity relating to boarding that will help me maintain lifestyle, what I want to do is minimise my tax...

Yes, but it's by making income that you can claim deductions.

 

[Bill.L]

Hi all,

XbenX, the reason why people are saying that you have to earn related income is because of changes to the tax laws a few years ago to stop people from doing exactly what you are planning.

It included stopping many small hobby farmers from claiming their losses and small part-time businesses from home.

This is the link to the ATO page......

http://www.ato.gov.au/businesses/content.asp?doc=/content/13280.htm&page=4&H4

If you can satisfy one of those tests your in..

bye

 

[XBenX]

Cheers Bill.L

I have thought about hobby farms etc (see the references in my earlier posts)

Lets take skiing as an example...

One.tel sponsored skiing - both individuals and events (it was a shame to see them go, they did a lot for the sport)

One.tel was not in a related business.

Lets look at cigarettes and motor racing - again unrelated...

The key is sponsorship and an objective mind...

Ive found someone doing something similar that has a private ruling - not sure why my searches didnt turn it up...

I must clarify you do need your own business (but it does not need to be related) to be able to consider doing this style of thing (sorry if Ive confused people in that regard)