Private ruling: Non-commercial loss
Published: August 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the Commissioner exercise the discretion under paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses in your calculation of taxable income for the 2012-13 and 2013-14 financial years? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Division 35. | Income Tax Assessment Act 1997 Subsection 35-10(2E). | 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 ITAA 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, or • the Commissioner exercises his discretion. The relevant discretion as outlined in paragraph 35-55(1)(b) of the ITAA 1997 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 and • 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 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 to 2013-14 financial years.

Relevant facts: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: | • your private ruling application, including industry articles and profit and loss figures and forecasts. | You commenced business and planted your first crop in 2012. | You have stated that the commercially viable period for your activity is two years. You have provided published data in relation to this. | You will gain organic certification which will allow you to charge a premium price on the crop. | You predict a taxable profit in 2014-15 financial year. | You satisfy the income requirement under subsection 35-10(2E) of the ITAA 1997.