Private ruling: Non-Commercial Losses Commissioner's discretion- special circumstances
Published: September 2017
Ruling period: Year ended 30 June 2018 to 30 June 2037
Date scheme commenced: 1 July 2009

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your tree plantation business activities in the calculation of your taxable income for the 2017-18 to 2036-37 financial years? | A1: Yes.

Relevant facts and circumstances: You do not satisfy the income requirement set out in subsection 35-10(2E) of the ITAA 1997. Your business commenced in the 20XX financial year. You planted X on your land in the 20XX financial year. You obtained a private ruling in 20XX where the Commissioner exercised his discretion in relation to your business losses. The ruling was limited to that period as the business was projected to produce assessable income from the 20XX/YY production process during the 20XX financial year. Due to special circumstances out of your control, the first production process has been postponed until the 20XX financial year. The 20XX/YY production is also projected to produce assessable income from the production process during the 20XX financial year. The final production is expected to be carried out in the 20XX financial year. You have provided independent evidence that attests to a lead time of X years for your industry. You predict that your business will be profitable in the 20XX, 20YY and 20ZZ financial years.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 35-10(1) | Income Tax Assessment Act 1997 subsection 35-10(2) | Income Tax Assessment Act 1997 subsection 35-10(2E), and | Income Tax Assessment Act 1997 paragraph 35-55(1)(c).

Reasons for decision: Summary: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. For the 2009-10 and later financial 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 2017-18 to 2036-37 financial years.