Private ruling: Non-commercial losses and the Commissioner's discretion
Published: June 2014
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2013

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 business activities in the calculation of your taxable income for the 2013-14 to 2017-18 financial years? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 35-10. | Income Tax Assessment Act 1997 - Subsection 35-10(2E). | Income Tax Assessment Act 1997 - Paragraph 35-55(1)(b) Reasons for decision | 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 | • 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 2013-14 to 2017-18 financial years.


Relevant facts: You and your spouse leased a parcel of land with the view to establishing a business. | Your planting program will be staggered. | You estimate that you will meet the assessable income test in year 5 (2017-18 financial year). | You have provided a brochure which shows that the first commercial crop will be achieved in five years after planting. | You satisfy subsection 35-10(2E) of the ITAA 1997 as your adjusted taxable income was less than $250,000 in the 2013-14 financial year. | Your assessable income from other sources that do not relate to the business activity is more than $40,000.