Private ruling: Non-commercial losses-Commissioner's discretion
Published: June 2013
Ruling period: Year ended 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2011

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 primary production activity in your calculation of taxable income from the 2011-12 to the 2017-18 financial year? | A1: Yes.

Relevant facts and circumstances: You conduct a primary production business which is carried out with key milestones as defined in the business plan. The business has been monitored and independently reviewed by experts and independent commissioned research has shown that production is on track to deliver a modest income in the prescribed financial year. You satisfy subsection 35-10(2E) of the ITAA 1997.

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)(b)

Reasons for decision: Summary: Section 35-1 of the ITAA 1997 provides that an income requirement must be met (along with certain other tests), in order to include losses from a business activity in your taxable income calculation. The income requirement under subsection 35-10(2E) of the ITAA 1997 is satisfied if your income for non-commercial loss purposes is less than $250,000. In your case, you satisfy the income requirement. Losses from activities that do not meet any of the four tests under Division 35 of the ITAA 1997, or the exception in subsection 35-10(4) of the ITAA 1997 will be subject to the loss deferral rule in subsection 35-10(2) of the ITAA 1997, unless the Commissioner exercises a discretion under paragraph 35-55(1)(b) of the ITAA 1997 that it would be unreasonable to defer the loss. It is accepted that it is in the nature of your activity that there will be a lead time before a profit can be expected or one of the tests passed. Having regard to your full circumstances, it is accepted that it is 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 from the 2011-12 to the 2017-18 financial year except for any financial year your activity achieves a profit.