Question

Sapo is both a doctor and a partner in Health Well medical practice. He receives $100,000 income from the medical practice in the current financial year.

For the past four years, Sapo has also made leather sandals for sale at his local market He has not yet made a profit from selling the sandals. In the current financial year Sapo has sold $15,000 worth of sandals but incurred expenses totalling $17,500. Sapo wishes to offset the $2,500 loss against his income from Health Well.

Required B:

Advise Sapo whether he can offset the loss.

In your response give reasons and refer to sections of legislation and cases, where relevant.

Answer 1

In the given case Sapoo is a doctor and has income from his profession and also a loss from his bussiness

Sapoo has professional income of $100000 and a bussiness loss of $2500 (17500-15000).

In this case, Sapoo has income and loss under the same head of income, which is termed as profits and gains from business and profession.

The Sapoo has income and loss under same head of income, then the Sapoo can offset the loss from business with the gain from profession.

This type of offsetting is be termed as intra head offset.

There is no restriction and limit of amount offsetting in intra head offset.  

Hence, Sapoo can offset his business loss with professional gain.

These are all the information required to solve the above given question.

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