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Ruling
Subject: Non-commercial losses
Question:
Are business losses deferred under the non-commercial loss provisions deductible now that the business has ceased?
Answer:
No.
This ruling applies for the following period
Year ending 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts
You commenced a business in 200X.
The business has never made a profit and has never passed any of the tests for non-commercial loss purposes.
The business has deferred non-commercial losses.
The business has now ceased and you have no intention of carrying on a similar business in the future.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Division 35.
Reasons for decision
Taxation Ruling TR 2001/14 discusses the issue of deferred losses when a business activity ceases to be carried on. It states, at paragraph 55:
In some cases an individual taxpayer's circumstances may change leaving issues about their ability to deduct the full extent of any loss made. Any amount deferred under subsection 35-10(2) will only be deductible in a subsequent year if the business activity that gave rise to this amount, or one 'of a similar kind', is carried on in that subsequent year. If the activity, or one 'of a similar kind', is never carried on again, the entitlement to deduct the amount will be lost.
In your case, the business activity that gave rise to your deferred losses has now ceased. If this business activity, or one of a similar kind, is never carried on again, you will be unable to claim the losses in the future and they will be lost.
While we appreciate your situation, there is no other discretion available to the Commissioner in Division 35 of the ITAA 1997 that would allow you to claim your losses in the circumstances you describe.