| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012176087519
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Non commercial business losses
Question 1
Are you entitled to include any loss from the activity in the calculation of your taxable income for the 2010-11 financial year?
Answer:
Yes
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts and circumstances
On 1 July 2007, you commenced a business activity.
After 1 July 2010, due to personal circumstances, you ceased operation of the business.
Assessable income from the activity up until after 1 July 2010, totalled $X.
The business activity suffered a loss in the 2010-11 financial year.
Your income for non-commercial business loss purposes in the 2010-11 financial year is less than $250,000.
You have met the assessable income test in all prior financial years.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 35
Income Tax Assessment Act 1997 Paragraph 35-30(b)
Income Tax Assessment Act 1997 Paragraph 35-55(1)(a)
Reasons for decision
Detailed reasoning
For the 2009-10 and later income years, Division 35 of the Income Tax Assessment Act 1997 (ITAA 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, or
· the Commissioner exercises his discretion.
Where a business activity is not in operation for the whole of an income year, paragraph 35-30(b) of the ITAA 1997 applies, so that the assessable income test is then based on a reasonable estimate of what the assessable income from the business activity would have been if the activity was carried on for the whole of that year.
The requirement in paragraph 35-30(b) is that a reasonable estimate be made of what the assessable income would have been had the business been carried on for a full year. Paragraph 62 of Taxation Ruling TR 2001/14 discusses how a reasonable estimate may be made.
In your case, your business activity produced income of $X for the 5 month period from July 2010 A reasonable estimate of the assessable income you would have received over the full year, based on these figures, is over the $20,000 threshold for the assessable income test.
Therefore your business activity is considered to have passed the assessable income test in the 2010-11 financial year and you are entitled to include the loss from the activity in the calculation of your taxable income.
As we consider you have passed the assessable income test for the financial year in question you are not required to defer your losses. Additionally, as you are considered to have passed a test, the Commissioner is not required to exercise the discretion for special circumstances under paragraph 35-55(1)(a) of the ITAA 1997.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
