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Edited version of private ruling
Authorisation Number: 1011661227108
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Ruling
Subject: Non-commercial losses - Commissioner's discretion
Will the Commissioner exercise the discretion in paragraph 35-55(1)(a) 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 income year?
No.
This ruling applies for the following period
1 July 2009 to 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
Your taxable income was over $250,000 in the 2009-10 income year due to a redundancy package given to you by your employer. This is preventing you from claiming your business losses in the 2009-10 income year. You consider this is a unique situation happening only because of the redundancy payment.
Your income in all previous years never exceeded $250,000.
Detailed reasoning
For the 2009-10 income year there have been changes to the non-commercial losses legislation to limit the circumstances where business losses can be offset against other income.
The introduction of the income requirement test means that individuals with a taxable income in excess of $250,000 for that year will not get access to the four tests. To be able to claim your losses in that year you have to be able to get the Commissioner's discretion under section 35-55 of the ITAA 1997 or meet one of the exclusions.
You have requested the Commissioner's discretion on the basis that your increased income, created by the termination payment, did not allow your business losses to be claimed against your 2009-10 income.
The information that you have provided is about why you have not been able to meet the income requirement test (redundancy payment), not about special circumstances that affected your business. In the 2009-10 year you have received a redundancy payment which has increased your income above $250,000. Your annual taxable income does not normally exceed $250,000. There is nothing in the legislation that allows an exemption from this test because of a one-off payment.
In terms of paragraph 35-55(1)(a) of the ITAA 1997, there are no special circumstances outside of your control that have affected your business activity in the 2009-10 year. There is no scope to allow the Commissioner's discretion under the special circumstances limb in section 35-55 of the ITAA 1997.
There are no other discretions, exemptions or exclusions that apply to your situation. The business losses for the 2009-10 income year will have to be deferred to the next income year where they may be deductible.