Private ruling: Non-commercial losses
Published: February 2014
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: You do not satisfy subsection 35-10(2E) of the ITAA 1997 as your income for non-commercial loss purposes exceeds $250,000.

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) 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 2012-13 to 2013-14 financial years? | A1: Yes.

Relevant facts and circumstances: You do not satisfy subsection 35-10(2E) of the ITAA 1997 as your income for non-commercial loss purposes exceeds $250,000. You commenced a primary production activity. You have provided independent evidence that the commercially viable period for your type of activity is at least x years. Your property suffered floods where you lost the majority of your highest producing products.

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

Reasons for decision: Summary: For the 2009-10 and later financial years, Division 35 of the ITAA 1997 will apply to defer a non-commercial loss from a business activity unless: · you meet the income requirement and you pass one of the four tests · the exceptions apply · the Commissioner exercises his discretion. In your situation, you do not satisfy the income requirement and do not come under any of the exceptions. Your business losses are therefore subject to the deferral rule. The relevant discretion may be exercised for the income year in question where: · it is in the nature of your business activity that there will be a period before a tax profit can be produced · there is an objective expectation your business activity will produce a tax profit within the 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 you making a tax profit. It is also accepted that you will make a tax profit within the commercially viable period for your industry. Consequently the Commissioner will exercise his discretion in the 2012-13 to the 2013-14 financial years.