Private ruling: Non-commercial losses
Date of advice: 24 October 2016
Published: February 2017
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20YY
Date scheme commenced: 1 July 20WW

Ruling: Q1: Are you entitled to claim the losses from your business against your other income in the 20WW-XX and 20XX-YY income years? | A1: Yes.

Relevant facts and circumstances: You commenced a business activity. Your income for non-commercial loss purposes is less than $250,000. Your business produced assessable income over $20,000 each financial year. Your business has made losses each financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 35-10 | Income Tax Assessment Act 1997 Section 35-30

Reasons for decision: Summary: Section 35-10 of the Income Tax Assessment Act 1997 (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. In your case, you meet the income requirement under subsection 35-10(2E) of the ITAA 1997 as your income for non-commercial loss purposes is below $250,000. As such, if you satisfy one of the four tests, you can offset your business activity losses against your other assessable income. Section 35-30 of the ITAA 1997 outlines the assessable income test. A business passes this test where it produces assessable income of at least $20,000 in the income year. In your case, you commenced a business. Your business has earned assessable income in excess of $20,000 for the years it has been operating. Therefore you have passed the assessable income test. As your business activity has satisfied the assessable income test in subsection 35-30(b) of the ITAA 1997, the deferral on non-commercial loss rule in subsection 35-10(2) of the ITAA 1997 does not apply to your losses. This means that any loss for your business activity can be included in calculating your taxable income for the 20WW-XX and 20XX-YY income years.