Private ruling: non-commercial business losses
Published: April 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Is your business activity considered to have passed the assessable income test in the 2010-11 financial year? | A1: 

Relevant facts and circumstances: In the 2010-11 financial year, you commenced a business activity. You applied for an ABN and were registered for GST. You purchased a vehicle and all the tools required to conduct the business activity. The business ceased to operate approximately 1 month after it commenced. You earned income of approximately $4,000 (excluding GST) for the month you were in business. The business activity suffered a net loss in the 2010-11 financial year. Your income for non-commercial business loss purposes in the 2010-11 financial year is expected to be less than $250,000.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 35 | Income Tax Assessment Act 1997 Paragraph 35-30(b)

Reasons for decision: Detailed Reasoning - Detailed reasoning: For the 2009-10 and later income years, Division 35 of the Income Tax Assessment Act 1997 will apply to defer a non-commercial loss from a business activity unless: · you satisfy the income requirement and you pass one of the four tests · the exceptions apply, or · the Commissioner exercises his discretion. Where a business activity is not in operation for the whole of an income year, paragraph 35-30(b) of the ITAA 1997 applies, so that the assessable income test is then based on a reasonable estimate of what the assessable income from the business activity would have been if the activity was carried on for the whole of that year. The requirement in paragraph 35-30(b) is that a reasonable estimate be made of what the assessable income would have been had the business been carried on for a full year. Paragraph 62 of Taxation Ruling TR 2001/14 discusses how a reasonable estimate may be made. Therefore your business activity is considered to have passed the assessable income test in the 2010-11 financial year.

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