Private ruling: Commissioner's discretion for non-commercial business losses.
Published: July 2012
Ruling period: 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
Date scheme commenced: 1 July 2010

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 to allow you to include any losses from your business activity in your calculation of taxable income for the 2011 to 2016 financial years? | A1: Yes

Relevant facts and circumstances: You satisfy the $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You undertake a primary production business. You have provided independent evidence that attests to a lead time of 4 to 5 years for your industry. You intend to make at least $20,000 in assessable income in the 2017 financial year.

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)

Reasons for decision: Summary: For the 2010-11 and later financial 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 · 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 years of income 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 income year in question where: · it is in the nature of the business activity that there will be a period of time before it can be expected to pass one of the four tests · there is an objective expectation your business activity will produce a tax profit or meet one of the four tests within a commercially viable period for your industry. Having regard to your full circumstances, it is accepted that it is the nature of the business activity that has prevented one of the four tests being passed. It is also accepted that you will pass one of the four tests or make a tax profit within the commercially viable period for your industry. Consequently the Commissioner will exercise his discretion in the 2011 to 2016 financial years.

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