Exercise of the discretion under section 35-55(1)

Product rulings issued since 13 July 2000 have considered the non-commercial loss provisions and the Commissioner's discretion. We anticipate that most applicants applying for new product rulings, in relation to projects based on investors carrying on a business, will now ask the Commissioner to also rule on the operation of section 35-55. Applicants must provide sufficient information relevant to this provision to allow this to occur. Intending applicants must complete all relevant parts of the Information required for a product ruling application.

However, an individual may have entered an arrangement for which there is no product ruling or there are additional losses beyond the period for which the Commissioner has previously ruled that he will exercise his discretion. Accordingly, most participants in such an arrangement will have to defer losses from that business activity until the activity produces a tax profit or, for participants who meet the income requirement, a test is passed.

Promoters or responsible entities may apply on behalf of participants, or potential participants, in their particular project for a ruling on the operation of Division 35 or to extend the period for which the Commissioner will exercise the discretion. If an arrangement has already commenced, we will consider issuing a product ruling dealing only on the non-commercial losses provisions. However, the arrangement must still be fully described and we will need to conclude that the deductions in question are otherwise allowable. Intending applicants in such a case are therefore advised to complete part 1 and 3 of the Information required for a product ruling application.

    Last modified: 03 Nov 2010QC 16137