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This edited version has been archived due to the length of time since original publication.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: 1012930128282

Date of advice: 22 December 2015

Ruling

Subject: Non-commercial business 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 primary production business activity (the activity) in the calculation of your taxable income for the 20XX-YY financial year?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20YY

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You started the activity in July 20XX.

You purchased a large number of pregnant stock, which gave birth in August 20XX. Due to the weather conditions that month a large percentage of the offspring perished.

As it takes 9-12 months for sufficient produce to be made by your stock, income could not be made from the activity before 30 June 20YY.

The activity has made income of more than $20,000 during the first half of the 20YY-ZZ financial year.

Your other income for non-commercial loss purposes was more than $40,000 but less than $250,000 in the 20XX-YY financial year.

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 income years, Division 35 of the ITAA 1997 will apply to defer a non-commercial loss from a business activity unless:

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 the nature of the business activity that prevented one of the four tests being passed during the 20XX-YY financial year. You have passed one of the four tests during the 20YY-ZZ financial year and it is accepted that this was within the commercially viable period for your industry.

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).