Private ruling: Non-commercial losses and the Commissioner's discretion
Published: October 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: On or after 1 July 2012

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your livestock business in the calculation of your taxable income for the 2012-13 financial year? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 35-55(1)(b)

Reasons for decision: Summary: For the 2009-10 and later income years, Division 35 of the Income Tax Assessment Act 1997 will apply to defer a non-commercial loss from a business activity unless: · you satisfy the income requirement and you pass one of the four tests · the exceptions apply · the Commissioner exercises his discretion. The relevant discretion may be exercised for the income year in question where: · it is in the nature of the business activity that there will be a period of time before it can be expected to pass one of the four tests · there is an objective expectation your business activity will produce a tax profit or meet one of the four tests within a commercially viable period for your industry. Having regard to your full circumstances, it is accepted that it is in the nature of the business activity that has prevented one of the four tests being passed. It is also accepted that you will pass one of the four tests or make a tax profit within the commercially viable period for your industry. Consequently the Commissioner will exercise his discretion in the 2012-13 financial year.

Relevant facts: You commenced a primary production business in 20XX when you acquired livestock. | You have provided projections to show that you will satisfy the assessable income test and you will achieve a tax profit in the 20XX-XX financial year. | You satisfy subsection 35-10(2E) of the ITAA 1997 as your adjusted taxable income is less than $250,000. | Your income from sourced not related to the business activity is more than $40,000.