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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your private ruling

Authorisation Number: 1012582337831

Ruling

Subject: Non-commercial losses

Question 1

Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your business in your calculation of taxable income for the 2012-13 to 2015-16 financial years?

Answer

Yes

Question 2

Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your business in your calculation of taxable income for the 2016-17 financial years?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You commenced a business as a sole trader in the relevant financial year.

You have provided information from an independent source that provides the lead time for your industry is six years.

You have provided information in relation to your future estimated tax profit or loss.

You satisfy the income requirement set out in subsection 35-10(2E) of the ITAA 1997.

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)(b)

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, none of the exceptions would apply and although you satisfy the income requirement, based on your projected profits you will not meet any of the four tests in the 2012-13 to 2015-16 financial years. The relevant discretion may be exercised for the income year in question where:

Having regard to your full circumstances, it is accepted that it is in the nature of the business activity that will prevent one of the four tests being passed in the 2012-13 to 2015-16 financial years. 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 the discretion in the 2012-13 to 2015-16 financial years.

However, as your figures show that you will meet the assessable income test in the 2016-17 financial year, the Commissioner will not exercise the discretion for that year.

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