Private ruling: Commissioner's discretion - non-commercial losses
Date of advice: 6 June 2023
Published: 31 July 2023
Ruling period: Year ended 30 June 2022
Date scheme commenced: 1 July 2021

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 your calculation of taxable income for the 2021-22? | A1: Yes. Having regard to your full circumstances, it is accepted that it is the nature of the business activity that has prevented you from meeting one of the four tests or making a tax profit. It is also accepted that you will pass the assessable income test or make a tax profit within the commercially viable period for your industry. Consequently, the Commissioner will exercise his discretion in the year ended 30 June 2022.

Relevant facts and circumstances: You satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on business in State A, which you commenced during the ruling period. Services were provided during Month B and you issued the tax invoice during the 2021-22 financial year. The payment was received during the 2022-23 financial year. You report your sales on a cash basis. You made a loss of a specified amount in the 2021-22 financial year. The expenses incurred for your loss were for business set up and licences. The transport required to do your job is provided each time. A contract with the payer was provided. You expect to meet one of the four tests in the 2022-23 financial year. You provided us with your year to date profit and loss statement for the 2022-23 financial year showing a net profit.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 35-10(1) | Income Tax Assessment Act 1997 subsection 35-10(2) | Income Tax Assessment Act 1997 subsection 35-10(2E) | Income Tax Assessment Act 1997 paragraph 35-55(1)(b)