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Ruling
Subject: Commissioner's discretion
Question 1
Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) of the ITAA 1997 to allow you to include any losses from your business activity in your calculation of taxable income for the 2011-12 to 2012-13 financial years?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commences on:
1 July 2011
Relevant facts and circumstances
Your income for non-commercial losses purposes is less than $250,000.
You carry on a business.
Due to factors unique to your situation you will not make a profit within the lead time for your industry.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 35-10(1)
Income Tax Assessment Act 1997 subsection 35-10(2)
Income Tax Assessment Act 1997 subsection 35-10(2E)
Income Tax Assessment Act 1997 paragraph 35-55(1)(b)
Reasons for decision
Act 1997 will apply to defer a non-commercial loss from a business activity unless:
· you satisfy the income requirement and you pass one of the four tests
· the exceptions apply
· the Commissioner exercises his discretion.
In your situation, none of the exceptions would apply and although you satisfy the income requirement, you do not meet any of the four tests in the years of income under consideration. Your losses are therefore subject to the deferral rule, unless the Commissioner exercises his discretion.
The relevant discretion may be exercised for the income year in question where:
· it is in the nature of the business activity that there will be a period of time before it can be expected to pass one of the four tests
· there is an objective expectation your business activity will produce a tax profit or meet one of the four tests within a commercially viable period for your industry.
Having regard to your full circumstances, it is not accepted that it is in the nature of the business activity that has prevented one of the four tests being passed. Consequently the Commissioner will not exercise his discretion for the years requested.