Private ruling: Non-commercial losses
Published: April 2014
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2011

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 business activity in your calculation of taxable income for the 2011-12 to 2014-15 financial years? | 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. You commenced your business in the 2011-12 financial year. You do not meet the income requirement under subsection 35-10(2E) of the ITAA 1997. You expect to make a tax profit in the 2015-16 financial year. An independent industry source confirms that the commercially viable period for your type of business is 5 years after starting the business.

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

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. 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. In your circumstances you commenced your business in the 2011-12 financial year and will produce a tax profit in the 2015-16 financial year. The independent industry source advises that a profit could be expected within five years on commencement of the business. Consequently the Commissioner will exercise the discretion in relation to your business activity for the 2011-12 and 2014-15 financial years.