| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1013106392004
Date of advice: 11 October 2016
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 your calculation of taxable income for the 20YY financial year?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 20YY
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.
You commenced a primary production business activity during the 20YY financial year.
You have submitted your profit projection demonstrating your intent to make a tax profit from these activities in the 20ZZ financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
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
Losses from activities that do not meet any of the four tests under Division 35 of the Income Tax Assessment Act 1997 (ITAA 1997), or the exception in subsection 35-10(4) of the ITAA 1997, will be subject to the loss deferral rule in subsection 35-10(2) of the ITAA 1997, unless the Commissioner exercises a discretion that it would be unreasonable to defer the loss.
It is accepted that it is in the nature of your activity that there will be a lead time before a profit can be expected or one of the tests passed. It is accepted that meeting a test within two years of commencing your activities will be within a commercially viable period for your industry.
The information you have provided demonstrates that there is an objective expectation that your business will make a profit in the 20ZZ financial year.
Therefore, the Commissioner's discretion under paragraph 35-55(1)(b) has been granted for the 20YY financial year.
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).
