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This edited version has been archived due to the length of time since original publication.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: 1013106391118

Date of advice: 18 October 2016

Ruling

Subject: Commissioners 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 activity in your calculation of taxable income for the 20XY-XX, 20XX-YY and 20YY-YZ financial years?

Answer

Yes

This ruling applies for the following period(s)

Year ended 30 June 20XX

Year ended 30 June 20YY

Year ending 30 June 20XZ

The scheme commences on

1 July 20XY

Relevant facts and circumstances

You are carrying on a business of primary production activities which commenced in 20XX.

You started with x agriculture stock but lost x due to drought, you currently have x agriculture stock remaining.

The agriculture stock will produce approximately an even mix of male and female offspring.

After two more years you will have increased your agriculture stock.

Your income for non-commercial loss purposes for the 20XY-XX to 20YY-YZ financial years is more than $40,000 but less than $250,000.

Your income projections show you expect to make in excess of $XX,000 in assessable income in the 20YZ-ZZ 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)

Detailed reasoning

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, you do not meet any of the four tests in the years of income under consideration. Your losses are therefore subject to the deferral rule, unless the Commissioner exercises his discretion.

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 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 will exercise the discretion in the 20XY-XX, 20XX-YY and 20YY-YZ 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).