Private ruling: Commissioner's discretion for non-commercial business losses
Published: August 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: On or after 1 January 2014

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 business activity in the calculation of your taxable income for the 2013-14 financial year? | A1: Yes

Relevant facts and circumstances: You and your spouse purchased a part of a property to carry on a primary production business activity. You did not purchase the property as a going concern. During the 2014 financial year you purchased a number of animal stock which will bear product for farming during the 2015 financial year. The farm will produce business income similar to the cash flow projections for the 2014-15 financial year of greater than $20,000. Your other income for non-commercial loss purposes was more than $40,000 but less than $250,000 in the 2013-14 financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Paragraph 35-55(1)(b)

Reasons for decision: Summary: For the 2009-10 and later income years, Division 35 of the Income Tax Assessment Act 1997 (ITAA 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, or • the exceptions apply, or • 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, or • 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. Therefore the Commissioner's discretion under paragraph 35-55(1)(b) of the ITAA 1997 has been granted for the 2013-14 financial year. The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.