Private ruling: Non commercial losses and the Commissioner's Discretion
Published: May 2012
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your tree activity in the calculation of your taxable income for the 2010-11 to 2012-13 financial years? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 35-1. | Income Tax Assessment Act 1997 - Subsection 35-10(2E). | Income Tax Assessment Act 1997 - Subsection 35-55(1) | Income Tax Assessment Act 1997 - Paragraph 35-55(1)(c).

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 2011-12 and 2012-13 financial years.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You purchased a property in 2011. | Crop producing trees were planted on the property prior to 2006 with more plantings in the later years. | You have provided information that commercial production is achieved when the trees are eight years of age. The trees will rapidly increase in yield between five and twelve years of age. From thirteen years onward, yields will continue to increase but will do so more slowly as the trees approach peak production. | You satisfy subsection 35-10(2E) of the ITAA 1997 as your adjusted taxable income was less than $250,000 in the 2010-11 financial year. | Your income will be more than $X thousand in each financial year. | You have provided projections that show that you will produce more than $X thousand assessable income in the 2013-14 financial year.