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

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 2012-13 to 2013-14 financial years? | A1: Yes.

Relevant facts and circumstances: 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. You carry on a primary production activity. You oversee the business and you employ part-time help to assist with the general upkeep and maintenance of the business. Independent contractors are also employed. During the 2011-12 income year your business was severely impacted by flooding. You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.

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

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, or · 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 you 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 your business activity is affected by special circumstances outside your control. 'Special circumstances' are those circumstances which are sufficiently different to distinguish them from the circumstances that occur in the normal course of conducting a business activity, including drought, flood, bushfire or some other natural disaster. For individuals who do not satisfy the income requirement, the business activity must have been materially affected by the special circumstances, causing it to make a loss. In this context, the Commissioner may exercise this discretion for the income year(s) in question where, but for the special circumstances: · your business activity would have made a tax profit, and · the activity passes at least one of the four tests or, but for the special circumstances, would have passed one of the four tests. Having regard to your full circumstances, it is accepted that your business activity was affected by special circumstances outside your control. Further, it is accepted that: · but for the special circumstances, you would have made a tax profit · you have met one of the four tests or would have but for special circumstances. Consequently the Commissioner will exercise his discretion in the 2012-13 and 2013-14 financial years.