Private ruling: Non commercial losses and the Commissioner's discretion
Published: June 2012
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: After 1 January 1998

Ruling: Q1: Will the Commissioner exercise the discretion under paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include losses from the plantation activity in the calculation of your taxable income for the 2009-10 to 2014-15 financial years? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 35-55 | Income Tax Assessment Act 1997 Paragraph 35-55(1)(c)

Reasons for decision: Summary: For the 2009-10 and later income years, Division 35 of the ITAA 1997 will apply to defer a non-commercial loss from a business activity unless: · you meet the income requirement and you pass one of the four tests · the exceptions apply · the Commissioner exercises his discretion. In your situation, you do not satisfy the income requirement (that is, your taxable income, reportable fringe benefits and reportable superannuation contributions but excluding your business losses, exceeds $250,000) and do not come under any of the exceptions. Your business losses are therefore subject to the deferral rule unless the Commissioner exercises his discretion. The relevant discretion may be exercised for the income year in question where: · it is in the nature of your business activity that there will be a period before a tax profit can be produced · there is an objective expectation your business activity will produce a tax profit within the 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 you making a tax profit. It is also accepted that you will make a tax profit within the commercially viable period for your industry. Consequently the Commissioner will exercise his discretion in the 2009-10 to 2014-15 financial years.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You carry on a primary production business of growing trees. Your share is one third of the land and plantation. | The property was purchased after 1 January1998 and at that time, the trees were 12 to 14 years old. | You entered into a management and harvesting contract in relation to the land. When the trees are harvested, you will be paid a royalty, less a charge to cover administration, management, book-keeping and road maintenance. | The trees have been progressively thinned. | You expect that the majority of the income will be earned at 30 to 32 years after planting when the majority of trees are harvested, in 2015-16 and 2016-17 financial years. | You will not satisfy subsection 35-10(2E) of the ITAA 1997 as your adjusted taxable income will be more than $250,000.