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Edited version of private ruling
Authorisation Number: 1011634477298
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Ruling
Subject: Private ruling - Non-commercial loss discretion
Question 1
For your participation as a grower in each of the projects listed, will the Commissioner exercise his discretion under paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) for the income years as indicated?
Project Income years
Project 1 2010 to 2014
Project 2 2010 to 2016
Project 3 2010 to 2017
Project 4 2010 to 2022
Project 5 2010 to 2013
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
Year ending 30 June 2019
Year ending 30 June 2020
Year ending 30 June 2021
Year ending 30 June 2022
The scheme commences on:
1 July 2003
Relevant facts and circumstances
You have stated in your application for a private ruling that you acquired interests in a number of registered agribusiness managed investment schemes (the projects), each of which was covered by a product ruling.
These product rulings ruled on a number of matters including the operation of Division 35 of the ITAA 1997 (non-commercial loss rules). Specifically, the rulings provided that the Commissioner will exercise the discretion under paragraph 35-55(1)(b) of the ITAA 1997.
On 14 December 2009, changes to the operation of the non-commercial loss rules became law and these changes were to apply from the 2010 income year. Two key changes were the introduction of the 'income requirement' and a new Commissioner's discretion for individuals who do not meet the 'income requirement' but whose business activity is subject to a lead time (paragraph 35-55(1)(c) of the ITAA 1997).
You have stated that you will not meet the income requirement, and therefore requested the Commissioner to exercise his discretion under paragraph 35-55(1)(c) of the ITAA 1997.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 35-10(2)
Income Tax Assessment Act 1997 subsection 35-10(2C)
Income Tax Assessment Act 1997 section 35-55
Income Tax Assessment Act 1997 paragraph 35-55(1)(b)
Income Tax Assessment Act 1997 paragraph 35-55(1)(c)
Reasons for decision
The Commissioner will exercise his discretion under paragraph 35-55(1)(c) of the ITAA 1997. This decision has been made on the basis that in the income years to which the discretion will apply, your business activity:
· has not or will not produce assessable income greater than the deductions attributable to it because of its nature; and
· there is an objective expectation that within a period that is commercially viable for the industry to which your business activity belongs, the business activity will produce assessable income for an income year greater than the deductions attributable to it for that year (apart from the operation of subsections 35-10(2) and (2C)).
For each income year the Commissioner exercises his discretion in respect of a project, you may offset a loss incurred from your business activity as a grower in that project against your other sources of assessable income.
It should be noted that the exercise of the discretion for a particular project is conditional on that project being carried out in the manner described in its product ruling that was issued.
In any income year that the discretion is not exercised for a particular project, any losses you incur as a grower in that project must be deferred to a future income year.