Private ruling: Non-commercial losses
Published: February 2013

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(a) of the ITAA 1997 to allow you to include any losses from your business activity in your calculation of taxable income? | A1: Yes


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

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 satisfy the income requirement and you pass one of the four tests · the exceptions apply, or · the Commissioner exercises his discretion. In your situation, none of the exceptions would apply and although you satisfy the income requirement, you do not meet any of the four tests in the financial year(s) under consideration. Your losses are therefore subject to the deferral rule, unless the Commissioner exercises his discretion. The relevant discretion may be exercised for the financial year in question where your business activity is affected by special circumstances outside your control. 'Special circumstances' are those circumstances which are sufficiently different to distinguish them from the circumstances that occur in the normal course of conducting a business activity, including drought, flood, bushfire or some other natural disaster. For individuals who satisfy the income requirement, special circumstances are those which have materially affected their business activity, causing it not to meet any of the four tests. In this context, the Commissioner may exercise this discretion for the financial year(s) in question where, but for the special circumstances the activity would have passed at least one of the tests. Having regard to your full circumstances, it is accepted that your business activity was affected by special circumstances outside your control and that these prevented you meeting one of the four tests. Consequently the Commissioner will exercise his discretion in the financial years in question.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. | You submit that you were affected by special circumstances which prevented you from passing one of the four tests | You have submitted evidence to support your claim.