Edited version of private ruling

Authorisation Number: 1011829380388

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Ruling

Subject: Non-commercial losses and the Commissioner's discretion

Question

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 tree growing business in the calculation of your taxable income for the 2008-09 to 2014-15 financial years?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2009
Year ended 30 June 2010
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

The scheme commenced on

1 July 2008

Relevant facts

You planted 500 trees in the 2008-09 financial year.

You have provided projections to show that you will satisfy the assessable income test and you will achieve a tax profit in the 2015-16 financial year.

You have provided information from an independent authority that states that you will not get a crop until the tree is at least five years old and will not fruit fully until they are ten years old.

You satisfy subsection 35-10(2E) of the ITAA 1997 as your adjusted taxable income is less than $250,000.

Your income from sources not related to the business activity is more than $40,000.

Relevant legislative provisions

Income Tax Assessment Act 1997 paragraph 35-55(1)(b)

Note:

The issue of this ruling of itself does not constitute a decision of the Commissioner under subsection 35-55(1) of the ITAA 1997 that the loss deferral rule in subsection 35-10(2) of the ITAA 1997 does not apply to you for the financial years in question. That decision can only be made in issuing you your assessment, following lodgement of your income tax return for these financial years. You can lodge these returns on the basis that the Commissioner is bound to make this decision as set out in this ruling, where the facts set out in the ruling do not differ materially from the actual facts concerning your business activity.

Reasons for decision

For the 2009-10 and later income 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.

The relevant discretion may be exercised for the income years 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 for the 2008-09 to 2014-15 financial years.

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