| Disclaimer This edited version has been archived due to the length of time since original publication.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 written advice
Authorisation Number: 1012711461662
Ruling
Subject: Non-commercial losses
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 primary production business activity in the calculation of your taxable income for the 2011-12 to 2014-15 financial years?
Answer
Yes
This ruling applies for the following periods:
• Year ended 30 June 2012
• Year ended 30 June 2013
• Year ended 30 June 2014
• Year ended 30 June 2015
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You commenced a mixed farming primary production business during the 20** financial year.
Since starting the business it has suffered a plague, a flood, a drought and you have lost your other employment. Despite this, you are on target for the business to be profitable by the 20** financial year.
To combat the above issues you have made improvements on key areas like water storage, irrigation and soil management. This will also allow you to expand the business operation and enable you to diversify the plantation by introducing other crops.
You submit that provided you do not suffer setbacks like previous years, turnover should exceed $20,000 by the 20** financial year.
You advised that income for non-commercial loss purposes were/will be more than $40,000 but less than $250,000 for the 20** to 20** financial years.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 35
Income Tax Assessment Act 1997 Paragraph 35-55(1)(b)
Reasons for decision
For the 2009-10 and later income years, Division 35 of the 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, or
• the exceptions apply, or
• the Commissioner exercises his discretion.
The relevant discretion may be exercised for the income year 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, or
• 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 in 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.
Therefore the Commissioner's discretion under paragraph 35-55(1)(b) of the ITAA 1997 has been granted for the 2011-12 to 2014-15 financial years.
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).
