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Edited version of your private ruling
Authorisation Number: 1012492068121
Ruling
Subject: Non-commercial losses - Commissioner's discretion
Question 1
Will the Commissioner exercise the discretion in subsection 35-55(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include the accumulated deferred losses from your business activity in your calculation of taxable income for the relevant financial year?
Answer
No.
Question 2
Will the Commissioner exercise the discretion in subsection 35-55(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include the deferred losses for each year from your business activity in your calculation of taxable income for the 200X to the 200Y financial years?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2005
Year ended 30 June 2006
Year ended 30 June 2007
Year ended 30 June 2008
Year ended 30 June 2009
Year ended 30 June 2010
The scheme commenced on
1 July 2004
Relevant facts and circumstances
You were in a primary production partnership. You were forced to leave the business in the relevant year on a court ordered property settlement.
From the 200X financial year up to and including the 200Y financial year you had deferred losses.
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 paragraph 35-55(1)(a)
Reasons for decision
Business
The object of Division 35 of the ITAA 1997 is described in paragraph 35-5(1)(a) as improving the integrity of the taxation system by preventing losses from non-commercial activities that are carried on as businesses by individuals being offset against other assessable income.
In your circumstances you were not in business in the relevant financial year therefore Division 35 of the ITAA 1997 does not apply and the Commissioner's discretion cannot be exercised in relation to your accumulated deferred losses.
Special circumstances - Commissioners Discretion
Under section 35-55 of the ITAA 1997 the Commissioner has the discretion not to defer the loss. This discretion may be exercised when the activity is affected by special circumstances outside the control of the taxpayer.
In your circumstances from the 200X to the 200Y financial year you were carrying on a primary production business that made losses for each of those years and in relevant year you were forced out of business by a court ordered property settlement.
The Commissioner's discretion may apply to situations where losses are incurred because the business activity was affected by special circumstances. Although the property settlement may have affected you personally it was not a contributing factor to the business losses made in the respective years. Therefore the Commissioner's discretion will not be exercised for the losses in 200X to the 200Y financial year.