Private ruling: Commissioner's discretion
Published: September 2011
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2009

Ruling: Q1: 1. 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 livestock breeding enterprise in the calculation of your taxable income for the 2009-10 and 2010-11 financial years? | A2: 


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: Section 35-1 of the ITAA 1997 provides that an income requirement must be met (along with certain other tests), in order to include losses from a business activity in your taxable income calculation. If the income requirement is not met, the Commissioner may exercise discretion to allow the inclusion of the losses. You satisfy the income requirement under subsection 35-10(2E) of the ITAA 1997 if your income for non-commercial loss purposes is less than $250,000. In your case, you do not satisfy the income requirement as your income for non-commercial loss purposes is above $250,000. In order to exercise the discretion, the Commissioner must be satisfied there is an objective expectation, based on evidence from independent sources, that your business activity will produce assessable income greater than the deductions attributable to it for that year, within a commercially viable period (paragraph 35-55(1)(c) of the ITAA 1997). In your case, you commenced your livestock breeding activities in the 20XX financial year. You have provided evidence from an independent source that suggests the commercially viable period for your industry/business can be up to X years. In your projected income and expenditure statements, you anticipate that your business activity will produce a tax profit in the 2011-12 financial year, or X years after your business began. Taking into consideration the information you have provided, the Commissioner is satisfied that your business activity will produce assessable income greater than the deductions attributable to it within a period that is commercially viable for this industry. Therefore, the Commissioner will exercise the discretion available under paragraph 35-55(1)(c) of the ITAA 1997 and allow the losses from your business activity to be included in the calculation of your taxable income for the 2009-10 and 2010-11 financial years. As your projected figures anticipate that your activities will produce a profit from the 2011-12 financial year, the Commissioner cannot exercise the discretion beyond the 2010-11 financial year.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | 2. Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the ITAA 1997 to allow you to include any losses from your livestock breeding enterprise in the calculation of your taxable income for the 2011-12 and 2015-16 financial years? | Your activities are conducted on a property of approximately X acres. | Your projected income and expenditure statements show that you anticipate that your business activities will begin to produce a tax profit from the 2011-12 financial year. | You have provided independent evidence from an industry expert suggesting that the commercially viable period for the industry is X years. | Your income for non commercial loss purposes for the 2009-10 and 2010-11 financial years was more than $250,000. You expect this will be the case in the 2011-12 to 2015-16 financial years as well.