Private ruling: Deductions of losses
Date of advice: 19 March 2019
Published: May 2019
Ruling period: Year ended 30 June 2005 | Year ended 30 June 2006 | Year ended 30 June 2007 | Year ended 30 June 2008 | Year ended 30 June 2009 | Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2004

Ruling: Q1: Can you claim a deduction in any of the income years for the tax losses incurred in any of the loss years? | A1: No

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 are the trustee of the trust. You are a contract project management and professional development business. When the Global Financial Crisis occurred the business collapsed. In the years between 2005/06 and 2009/10 the trust returned income. The years from 2005/6 to 2009/10 are collectively referred to as income years. In the years between 2010/11 and 2016/17 the trust returned a loss. The years from 2010/11 to 2016/17 are collectively referred to as loss years.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 8-5 | Income Tax Assessment Act 1997 Subsection 36-15(2) | Income Tax Assessment Act 1997 Subsection 36-15(7) Summary | There is no provision in the Income Tax Assessment Act 1997 (ITAA 1997) that allows prior year losses to be included in the calculations for prior years income.

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in the gaining or producing of your assessable income or that is necessarily incurred in carrying on a business for the purpose of gaining or producing you’re assessable income. To be deductible under section 8-1 of the ITAA 1997, a loss or outgoing must have a sufficient connection with the derivation of the taxpayer's assessable income. Deductions for expenses can only be applied in the years that they are incurred. Expenses which are incurred in future years do not have sufficient connection with a past years assessable income. Where there are provisions of ITAA 1997 Act outside Division 8, that allows or disallows Specific deductions, those provisions apply (as per Section 8-5 of the ITAA 1997). Division 36 of the ITAA 1997 - Tax losses of earlier income years –allows in specific circumstances for income tax losses from a previous year to be utilised in that year or a later income year. Subsection 36-15(2) of the ITAA 1997 provides that where a taxpayer does not have net exempt income, and the total assessable income for the later income year exceeds the total deductions (other than tax losses), the taxpayer deducts the tax loss from that excess. Where all or part of the tax loss cannot be deducted in an income year, subsection 36-15(7) of the ITAA 1997 provides that the undeducted amount can be carried forward to the next income year. The undeducted amount is then applied to any excess in that income year or the balance carried forward to subsequent income years. However, there is no provision that allows the deductions or losses to be made available to prior years.