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Edited version of your private ruling

Authorisation Number: 1012457124651

Ruling

Subject: Non-commercial losses

Question

Will the Commissioner exercise the discretion in subsection 35-55(1) of the ITAA 1997 to allow you to include any losses from your business activity in your calculation of taxable income for the relevant 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

You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997 for the relevant financial year.

You carry on a business which has a period of time before a profit can be made. Your business was also affected by special circumstances

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 35-10(1)

Income Tax Assessment Act 1997 subsection 35-10(2)

Income Tax Assessment Act 1997 subsection 35-10(2E)

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

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

Reasons for decision

For the 2009-10 and later financial years, Division 35 of the ITAA 1997 will apply to defer a non-commercial loss from a business activity unless:

In your situation, you do not satisfy the income requirement (that is your taxable income, reportable fringe benefits and reportable superannuation contributions but excluding your business losses, exceeds $250,000) and do not come under any of the exceptions. Your business losses are therefore, subject to the deferral rule unless the Commissioner exercises his discretion.

The relevant discretion may be exercised for the financial year in question where:

The relevant discretion may also be exercised for the financial year in question where your business activity is affected by special circumstances outside your control.

'Special circumstances' are those circumstances which are sufficiently different to distinguish them from the circumstances that occur in the normal course of conducting a business activity, including drought, flood, bushfire or some other natural disaster.

Having regard to your full circumstances, it is accepted that it is in the nature of the business activity that has prevented you making a tax profit. It is also accepted that the period of time prior to your business making a tax profit was may have been extended by the effects of special circumstances.

Consequently the Commissioner will exercise his discretion in the relevant financial years.

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