Private ruling: Non-commercial losses and the Commissioner's discretion
Published: September 2013
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 11 February 2013

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


Relevant legislative provisions: Income Tax Assessment Act 1997 - paragraph 35-55(1)(a) | 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 Income Tax Assessment Act 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 20XX and 20YY financial years.

Relevant facts: You purchased farm land in partnership with another person in month 20XX. | You planted a crop on approximately half of the property in month 20XX and will plant on the remainder in month and month 20YY. | The crop takes 12 to 16 months to mature and the first crop will be harvested in the 20ZZ financial year. | You estimate that the income in the 20ZZ financial year will be $X. You will, therefore, satisfy the assessable income test in the 20ZZ financial year. | You satisfy subsection 35-10(2E) of the ITAA 1997 as your adjusted taxable income was not more than $250,000 in the 2009-10 financial year. | Your income from other sources not related to the activity is more than $40,000.