Private ruling: Non-commercial losses
Published: December 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 01 July 2011

Ruling: Q1: Do the non-commercial loss provisions of Division 35 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to your mixed business as a single business activity? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The partnership operates two primary production business activities on the same property. These activities have been treated as a single business for tax purposes. The by-product from each activity is used for the other activity. This saves you buying in these products and has proved commercially valuable.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 35-10(3).

Reasons for decision: Summary: Taxation Ruling TR 2001/14 discusses the Commissioner's view of the non-commercial business loss provisions in Division 35 of the ITAA 1997. A business may be seen as made up of two or more separate and distinct business activities. Where there are separate business activities, each business activity must individually meet the requirements of Division 35 of the ITAA 1997. Where there are separate and distinct business activities, a further question may be raised as to whether they are of a similar kind (under Subsection 35-10(3) of the ITAA 1997) and can therefore be grouped together for the purposes of Division 35 of the ITAA 1997, if the taxpayer chooses. This would produce, for a particular income year, the same result practically as if those activities had not been identified as separate business activities in the first place. Paragraph 45 of TR 2001/14 provides a list of factors which may be considered in determining if separate business activities are being carried on. The factors include: · the type of activities being carried on · the location the activities are carried out · the types of assets used · the types of goods and services produced and related market conditions · interdependency between the activities · commercial links between the activities. In application to your case the partnership carries on a business consisting of two primary production activities. Both activities are carried out on the same property. Although they have different markets, there are integrally and commercially linked to each other, as by-products from each activity are used in the other. Given that the two activities are on the same property and compliment each other, we consider that, in this case, it would constitute one mixed business activity and not be viewed as separate businesses for non-commercial loss purposes.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.