Private ruling: Non-commercial losses and the Commissioner's discretion
Published: July 2011
Ruling period: Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013 Year ended 30 June 2014 Year ended 30 June 2015 Year ended 30 June 2016 Year ended 30 June 2017 Year ended 30 June 2018 Year ended 30 June 2019
Date scheme commenced: 1 July 2009

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 trees activity in the calculation of your taxable income for the 2009-10 to 2018-19 financial years? | A1: Yes.


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 income 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 (that is, your taxable income, reportable fringe benefits and reportable superannuation contributions but excluding your business losses, exceeds $250,000) and do not come under any of the exceptions. Your business losses are therefore subject to the deferral rule unless the Commissioner exercises his discretion. 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 20XX-XX to 2018-19 financial years.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | You planted approximately 3,000 trees in the 20XX-XX financial year. | You have provided independent advice which shows that the expected yields from trees commences in the fifth year after planting and are at full production at twelve or thirteen years. | You do not satisfy subsection 35-10(2E) of the ITAA 1997 as your adjusted taxable income was more than $250,000 in the 2009-10 financial year and is likely to be more than $250,000 for the foreseeable future. | You have provided projections that show that your income will be more than your expenses for the activity in the 2019-20 financial year. Relevant legislative provisions