Taxation Ruling
TR 2001/14A2 - Addendum
Income tax: Division 35 - non-commercial business losses
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Addendum
This Addendum amends Taxation Ruling TR 2001/14 to remove discussion regarding the operation of the Commissioner's discretion in Division 35 of the Income Tax Assessment Act 1997 as this is now covered by draft Taxation Ruling TR 2007/D1.
Taxation Ruling TR 2001/14 is amended as follows:
(a) Omit:
(iii) the Real property test in section 35-40;
(iv) the Other assets test in section 35-45; and
* the operation of the Commissioner's discretion in section 35-55.
substitute:
(iii) the Real property test in section 35-40; and
(iv) the Other assets test in section 35-45.
(b) After the paragraph insert:
1A. It does not consider in detail the operation of the Commissioner's discretion in section 35-55. This aspect is the subject of a separate Taxation Ruling (TR 2007/D1 Income tax: non-commercial business losses: Commissioner's discretion).
(a) Omit the heading; substitute:
Exercise of the Commissioner's discretion - two limbs
(b) Omit 'arms' in the second sentence; substitute 'limbs'.
(c) Omit 'arm' (wherever occurring); substitute 'limb'.
After the paragraph insert:
When does a business activity start to be carried on for the purposes of the second limb of the Commissioner's discretion in section 35-55?
69A Before the Commissioner can consider exercising the second limb of the discretion in section 35-55, a taxpayer must have started to carry on the relevant business activity. Broadly, this requires the taxpayer to have:
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- made a decision to commence the business activity;
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- acquired the minimum level of business assets to allow that business activity to be carried on; and
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- actually commenced business operations.
A mere intention to start carrying on the business activity will not be sufficient.[10A]
Omit the paragraphs (including headings).
Omit the paragraphs (including headings).
Omit the heading; substitute:
Whether a business activity has started to be carried on for the purposes of the Commissioner's discretion in section 35-55
Omit the paragraphs (including headings).
Omit the paragraphs (including headings).
(a) Omit:
| Exercise of the Commissioner's discretion - 2 arms | 30 |
substitute:
| Exercise of the Commissioner's discretion - two limbs | 30 |
(b) After:
| All tests - determining whether general law partnership exists | 68 |
insert:
| When does a business activity start to be carried on for the purposes of the second limb of the Commissioner's discretion in section 35-55? | 69A |
(c) Omit the following entries:
| Operation of section 35-55 - the Commissioner's discretion | 70 |
| 'Special circumstances' | 70 |
| *Business activity has started to be carried on | 75 |
| Meaning of 'because of its nature' | 77 |
| Objective expectation of meeting a test or producing a tax profit within a period that is commercially viable for the industry concerned | 79 |
| Exercise of the Commissioner's discretion - 2 arms | 94 |
| Second arm - certain start-up *business activities | 95 |
| Meaning of 'because of its nature' | 106 |
| Alternative view | 112 |
| Objective expectation of becoming commercially viable | 114 |
| Example 10 - exercise of the first arm of the discretion, special circumstances | 147 |
| Example 11 - first arm of discretion not exercised | 150 |
| Example 12 - second arm of discretion not exercised | 154 |
| Example 12A - first arm of discretion not exercised | 156 |
| Example 13 - exercise of the second arm of the discretion | 158 |
| Example 13A - second arm of the discretion not exercised | 162 |
| Example 14 - second arm of the discretion unlikely to be exercised | 165 |
(d) Omit:
| Whether activity has started to be carried on | 97 |
substitute:
| Whether a business activity has started to be carried on for the purposes of the Commissioner's discretion in section 35-55 | 97 |
10. Related Rulings/Determinations
Insert:
TR 2007/D1
Commissioner of Taxation
24 January 2007
References
ATO references:
NO 2006/20258