Edited version of private ruling

Authorisation Number: 1011789628369

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Ruling

Subject: Commissioner's discretion - lead time

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 aquaculture activities in the calculation of your taxable income for the 2009-10 to 2013-14 financial years?

Answer: Yes.

This ruling applies for the following period

Year ended 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014

The scheme commenced on

1 July 2009

Relevant facts

In 20XX, you commenced an aquaculture business on approximately XX hectares of leased ocean.

Your business activity involves the growing and harvesting, for sale, of marine organisms.

Research has shown that the marine organisms will reach saleable size within a number of years.

Expenses incurred on setting up this part of the business have been the markers to set out the XX hectares, annual lease fees and various fisheries license fees, as well as the cost of related structures.

Relevant legislative provisions

Income Tax Assessment Act 1997 - Division 35
Income Tax Assessment Act 1997 - Section 35-30
Income Tax Assessment Act 1997 - Section 35-35
Income Tax Assessment Act 1997 - Section 35-40
Income Tax Assessment Act 1997 - Section 35-45
Income Tax Assessment Act 1997 - Section 35-55(1)(b)

Reasons for decision

Under paragraph 35-55(1)(b) of the ITAA 1997, the Commissioner's discretion can be exercised where: 

· the business activity has started to be carried on but because of its nature it has not satisfied, or will not satisfy, one of the tests set out in sections 35-30, 35-35, 35-40 or 35-45 of the ITAA 1997; and  

· there is an objective expectation that within a period that is commercially viable for the industry concerned the activity will meet one of the tests listed above or produce assessable income for an income year greater than the deductions attributable to it for that year.  

Taxation Ruling TR 2007/6 sets out the exercise of the Commissioner's discretion under paragraph 35-55(1)(b) of the ITAA 1997. 

The discretion is provided to ensure that certain individuals who carry on genuine commercial businesses are not disadvantaged due to particular circumstances which prevent them from satisfying one of the tests or producing a tax profit. 

For the Commissioner to exercise the discretion you must be able to show that the business activity will satisfy one of the tests or produce a tax profit, within the period which a commercially viable business would do so.

You have provided research evidence to establish the commercially viable period for this type of business is five years.

Based on the general evidence available, the Commissioner is satisfied that there is an objective expectation that, within a period that is commercially viable for the industry, your aquaculture activities will satisfy one of the tests or produce a tax profit.

Therefore, the Commissioner will exercise the discretion in paragraph 35-55(1)(b) of the ITAA 1997 to allow you to include any losses from your aquaculture activities in the calculation of your taxable income for the 20XX-XX to 20XX-XX financial years.