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Edited version of private ruling
Authorisation Number: 1011743510111
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Ruling
Subject: Non-commercial losses - Commissioner's discretion
Question
Will the Commissioner exercise his discretion to allow you to include any losses from your animal fattening activity in calculating your taxable income for the year ended 30 June 2010?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You commenced an animal fattening activity during the 2009-10 financial year.
In your business plan, you stated you intended to purchase young animals and fatten them using pasture, supplementary feeding and dry feeding. The use of supplementary and dry feed increases the average daily weight gain.
You will also have breeding animals which you expect to produce progeny each year. These progeny will be fattened and then sold.
You expect to make a profit in the 2010-11 financial year.
Your income for non-commercial loss purposes was less than $250,000 for the year ended 30 June 2010.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 35-10
Income Tax Assessment Act 1997 Section 35-55
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 animal fattening 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 the animal fattening 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 2010-11 financial year.
Therefore, the Commissioner's discretion under paragraph 35-55(1)(b) of the ITAA 1997 has been granted for the 2009-10 financial year.