Private ruling: The non-commercial loss income requirement
Date of advice: 10 April 2019
Published: May 2019
Ruling period: Financial year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Do you satisfy the income requirement under section 35-10(2E) of the Income Tax Assessment Act 1997 ? | A1: Yes. Having considered your circumstances and the relevant factors, you satisfy the income requirement under section 35-10(2E) of the Income Tax Assessment Act 1997. Further information on the income requirement can be found by searching ' QC 55240' on ato.gov.au

Relevant facts and circumstances: You were a partner of a partnership which operated a business activity (the activity) for a number of years. During the 2016-17 financial year your business partner exited the partnership and you continued to operate the ac tivity as a sole trader. During the 2017-18 financial year you had work in progress (WIP) of $X. However as WIP aren’t converted to invoices until claims are finalised/settled, which can take a number of years, your income for the 2017-18 financial year was only $X. Even though the partnership ended in the 2016-17 financial year, many of the overheads and expenses remained the same for the activity operating as a sole trader. As a result the sole trader activity was in a loss situation at the end of the 2017-18 financial year. During the 2017-18 financial year you received a partnership distribution of more than $X from the activity. The sum of your non-business activity income, total reportable fringe benefits, reportable superannuation contributions and total net investment losses for the 2017-18 financial year are less than $250,000.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 35-10 | Income Tax Assessment Act 1997 Section 35-30(2E)