Private ruling: Non-commercial losses-Commissioner's discretion
Published: May 2012
Ruling period: Year ending 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your primary production activity in your calculation of taxable income for the financial year ended 30 June 2011? | A1: No.

Relevant facts and circumstances: You operate a primary production business in partnership. You have not earned more than $250,000 in previous years and do not expect to earn more than $250,000 in the immediate future. You were successful in obtaining a new position in your employment but were not permitted to carry over your accrued annual leave. This leave was paid to you and resulted in your income for non-commercial purposes to exceed $250,000 in the 2010-11 financial year.

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 paragraph 35-55(1)(a) | Income Tax Assessment Act 1997 paragraph 35-55(1)(c) | Income Tax Assessment Act 1997 subsection 35-10(2E)

Reasons for decision: Summary: You have not satisfied the income requirement as your relevant income has exceeded $250,000. Therefore the loss from your activity will not be taken into account in the financial year ended 30 June 2011 unless the Commissioner will exercise his discretion in section 35-55 of the ITAA 1997. To apply the discretion in paragraph 35-55(1)(a) of the ITAA 1997, the Commissioner should be satisfied that the business activity is affected in the relevant year by special circumstances. Your annual taxable income does not normally exceed $250,000. In the financial year ended 30 June 2011 you received a payment for accrued leave which increased your income above $250,000. An increase in salary is not considered a special circumstance that affects your business activity. There is nothing in the legislation that allows an exemption from the income requirement because of a one-off payment. There are no other discretions, exemptions or exclusions that apply to your situation in relation to the one off payment preventing you meeting the income requirement.

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