Private ruling: Non commercial losses - Commissioner's discretion
Ruling period: Year ended 30 June 2010 | Year ending 30 June 2011 | Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2009

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 primary production activity in your calculation of taxable income for the 2009-10 to 2013-14 financial years? | A1: 

Relevant facts and circumstances: You are in the process of establishing a small vineyard to grow wine grapes to sell. You planted vines in 2010 and again in 2011. You intend to produce your own wines. You submit that it takes grape vines approximately three years to produce a significant crop and a year on top of that to turn the grapes to wine ready for sale. You expect that a tax profit will be made in the 2014-15 financial year. You will also meet the assessable income test in that year. You do not meet any of the exceptions in Division 35 of the ITAA 1997. You satisfy the income requirement under subsection 35-10(2E) of the ITAA 1997.

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

Reasons for decision: Summary: For the 2009-10 and later income years, Division 35 of the 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 · the exceptions apply · the Commissioner exercises his discretion. In your situation, none of the exceptions would apply and although you satisfy the income requirement, you do not meet any of the four tests in the years of income under consideration. Your losses are therefore subject to the deferral rule, unless 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 the 2009-10 to 2013-14 financial years.

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