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Edited version of private ruling
Authorisation Number: 1011476772305
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Ruling
Subject: Non-commercial business losses
Question
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 activity in your calculation of taxable income for the 2009-10 to 2015-16 income years?
Answer
Yes.
This ruling applies for the following periods:
1 July 2009 to 30 June 2010
1 July 2010 to 30 June 2011
1 July 2011 to 30 June 2012
1 July 2012 to 30 June 2013
1 July 2013 to 30 June 2014
1 July 2014 to 30 June 2015
1 July 2015 to 30 June 2016
1 July 2016 to 30 June 2017
1 July 2017 to 30 June 2018
1 July 2018 to 30 June 2019
1 July 2019 to 30 June 2020
1 July 2020 to 30 June 2021
1 July 2021 to 30 June 2022
1 July 2022 to 30 June 2023
1 July 2023 to 30 June 2024
1 July 2024 to 30 June 2025
1 July 2025 to 30 June 2026
1 July 2026 to 30 June 2027
1 July 2027 to 30 June 2028
1 July 2028 to 30 June 2029
1 July 2029 to 30 June 2030
1 July 2030 to 30 June 2031
1 July 2031 to 30 June 2032
1 July 2032 to 30 June 2033
1 July 2033 to 30 June 2034
1 July 2034 to 30 June 2035
1 July 2035 to 30 June 2036
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You are carrying on a primary production business.
Your income for non commercial loss purposes for the income year 2008-09 was more than $250,000.
You business activity will become commercially viable in X years.
The independent evidence you provided suggests that the commercially viable period for your industry is X years.
Reasons for decision
Section 35-1 of the ITAA 1997 provides that an income requirement must be met (along with certain other tests), in order to include losses from a business activity in your taxable income calculation. The income requirement is set out in subsection 35-10(2E) of the ITAA 1997. If the income requirement is not met, the Commissioner may exercise discretion to allow the inclusion of the losses.
In order to exercise the discretion, the Commissioner must be satisfied, based on evidence from independent sources, that your business activity will produce assessable income greater than the deductions attributable to it for that year, within a commercially viable period (paragraph 35-55(1)(c) of the ITAA 1997).
In your case, you do not meet the income requirement as your income for non commercial loss purposes is above $250,000. However, you have supplied evidence from an independent source which has established that your business activity will produce assessable income greater than the deductions attributable to it for that year, within a period that is commercially viable for this industry.
Therefore, the Commissioner will exercise the discretion available under paragraph 35-55(1)(c) of the ITAA 1997 and allow the losses from your business activity to be included in the calculation of your taxable income.