Private ruling: NCL Commissioner's discretion - lead time
Published: March 2015
Ruling period: Years ended 30 June 2015 to 2020
Date scheme commenced: 1 July 2008

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your business activity in your calculation of taxable income for the income years ended 30 June 2015 to 2020? | A1: Yes


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

Reasons for decision: Summary: For the 2009-10 and later financial years, Division 35 of the ITAA 1997 will apply to defer a non-commercial loss from a business activity unless: • you meet 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 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 financial year in question where: • it is in the nature of your business activity that there will be a period before a tax profit can be produced; and • there is an objective expectation your business activity will produce a tax profit within the 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 you making a tax profit. It is also accepted that you will make a tax profit within the commercially viable period for your industry. Consequently the Commissioner will exercise his discretion in the 2014-15 to 2019-20 financial years to allow you to utilise your losses from the business activity.

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: | • Application for a private ruling on the Commissioner's discretion for non-commercial business losses | • Non-commercial losses: evidentiary checklist | • Actuals and forecasts of income and expenses | • Letter from industry specialist | • E-mail response providing additional information as requested | • Fact Sheet from the government department | You acquired the necessary assets to conduct your business activity and have continued to perform all required activities that will result in your product being produced. | Your activity is of sufficient scale to be able to produce a profit as set out in the forecast figures you have provided, showing potential production and income and expenses. | You have provided independent evidence of the commercially viable period for the industry. | You are a member of the relevant industry associations. | You have engaged employees and contractors to complete the necessary work. | Your other income for non-commercial losses purposes in in excess of $250,000 in the 2013/14 income year. | ATO view documents: Taxation Ruling TR 2007/6 | Taxation Ruling TR 2001/14