Taxation Ruling

TR 2001/14A2 - Addendum

Income tax: Division 35 - non-commercial business losses

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:

1. Paragraph 1

(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).

2. Paragraph 30

(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'.

3. Paragraph 69

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:

·
made a decision to commence the business activity;
·
acquired the minimum level of business assets to allow that business activity to be carried on; and
·
actually commenced business operations.


A mere intention to start carrying on the business activity will not be sufficient.[10A]

4. Paragraphs 70 to 82A

Omit the paragraphs (including headings).

5. Paragraphs 94 to 96

Omit the paragraphs (including headings).

6. Paragraph 97

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

7. Paragraphs 106 to 114

Omit the paragraphs (including headings).

8. Paragraphs 147 to 170

Omit the paragraphs (including headings).

9. Paragraph 175

(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

Footnotes


See paragraphs 97 to 105 of this Ruling.

References

ATO references:
NO 2006/20258

ISSN: 1039 - 0731