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

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your livestock activity in the calculation of your taxable income for the 2009-10 to 2012-13 financial years? | A1: Yes


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

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, or · the Commissioner exercises his discretion. In your situation, you do not satisfy the income requirement (that is your taxable income, reportable fringe benefits and reportable superannuation contributions but excluding your business losses, exceeds $250,000) and you do not come under any of the exceptions. Your business losses are therefore subject to the deferral rule unless the Commissioner exercises his discretion. The relevant discretion may be exercised for the income years in question where your business activity is affected by special circumstances outside your control. 'Special circumstances' are those circumstances which are sufficiently different to distinguish them from the circumstances that occur in the normal course of conducting a business activity, including drought, flood, bushfire or some other natural disaster. For individuals who do not satisfy the income requirement, the business activity must have been materially affected by the special circumstances, causing it to make a loss. In this context, the Commissioner may exercise this discretion for the income year(s) in question where, but for the special circumstances: · your business activity would have made a tax profit · the activity passes at least one of the four tests or, but for the special circumstances, would have passed one of the four tests. Having regard to your full circumstances, it is accepted that your business activity was affected by special circumstances outside your control. Further, it is accepted that but for the special circumstances, you would have made a tax profit. Consequently the Commissioner will exercise his discretion in the 2009-10 to 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. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: You purchased a livestock property. | Your livestock are usually sold at nine to twelve months old. | The property has been drought declared since for some time. | If not for the drought, you would have been able to fully stock the property with an additional breeding livestock of which a large percentage progeny each year. You believe that you would have made a tax profit by the 2009-10 financial year. | Because of good rain in the 2010-11 financial year, you can build up the number of breeders and you now expect to make a tax profit in the 2013-14 financial year. | You have provided a relevant documentation. | You satisfy the assessable income test, the real property test and the other assets test. | You do not satisfy subsection 35-10(2E) of the ITAA 1997 as your adjusted taxable income was more than $250,000 in the 2009-10 financial year and is likely to be more than $250,000 for the foreseeable future.