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Edited version of private ruling

Authorisation Number: 1011514335128

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Ruling

Subject: non-commercial losses - Commissioner's discretion - lead time

Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your business activity in your calculation of taxable income for the 2007-08 to the 2009-10 income years ?

Yes.

This ruling applies for the following periods:

1 July 2007 to 30 June 2008
1 July 2008 to 30 June 2009
1 July 2009 to 30 June 2010

The scheme commences on:

1 July 2007

Relevant facts

The following documents form part of the scheme under consideration.

You commenced your business in 2007 and commenced rebuilding the dilapidated infrastructure.

Your income for non commercial loss purposes for the 2009-10 income year was less than $250,000. Your income from other sources since 2007-08 is more than $40,000.

Your business activity will become commercially viable in three years.

The independent evidence you provided suggests that the commercially viable period for your industry is three years.

Reasons for decision

Losses from activities that do not meet any of the four tests under Division 35 of the ITAA 1997, or the exception in subsection 35-10(4) of the ITAA 1997 will be subject to the loss deferral rule in subsection 35-10(2) of the ITAA 1997, unless the Commissioner exercises a discretion under paragraph 35-55(1)(b) of the ITAA 1997 that it would be unreasonable to defer the loss.

It is accepted that it is in the nature of your activity that there will be a lead time before a profit can be expected or one of the tests passed. It is accepted that meeting a test within three years of purchasing your business will be within a commercially viable period for your industry.

The information you have provided demonstrates that there is an objective expectation that your business activity will pass one of the tests (the assessable income test) or will produce a taxation profit by the 2010-11 income year.

Therefore, the Commissioner's discretion under paragraph 35-55(1)(b) has been granted from the 2007-08 income year to the 2009-10 income year.

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