Income tax: abnormal income of artists, sportspersons etc: can eligible taxable income be a negative amount for the purposes of Division 16A of Part III of the Income Tax Assessment Act 1936 (ITAA), so that a loss can be recognised from eligible activities and used to reduce average eligible taxable income?

No. The definition of eligible taxable income in Section 158J of ITAA does not imply the possibility of a loss. Eligible taxable income of a taxpayer is defined as '....the amount (if any) remaining after deducting from eligible assessable income....' any of those deductions specifically mentioned. The words 'if any' suggest that there may be no income in some cases. This implies a positive amount and therefore eligible taxable income cannot be a negative amount.

Since eligible taxable income cannot be negative, the amount of loss in a relevant year for the purposes of determining the average eligible taxable income in section 158K cannot also be negative. The loss is treated as a nil amount. Example: 1988 $ 1989 $ 1990 $ 1991 $ 1992 $ TOTAL $ eligible assessable income 8000 6000 9000 8000 5000 36000 LESS related deductions 2000 7000 12000 2000 6000 29000 ELIGIBLE TAXABLE INCOME 6000 (1000) (3000) 6000 (1000) 12000 ineligible assessable income 5000 4000 10000 3000 7000 LESS deductions - 500 1000 - - INELIGIBLE TAXABLE INCOME - 3500 9000 - - TOTAL TAXABLE INCOME 11000 2500 6000 9000 6000 The taxpayer is assumed to be a resident throughout the above years of income. For the 1989, 1990 and 1992 years eligible taxable income, being a negative amount, is to be treated as 'nil' for Division 16A purposes. The average eligible taxable income in accordance to section 158K, for the 1992 year, would be $3000 (ie. 1/4 of the total eligible taxable incomes of the preceding four years of income).