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Edited version of your private ruling
Authorisation Number: 1012583039001
Ruling
Subject: Non- commercial losses
Question
Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your plantation activity in your calculation of taxable income for the 2011-12 to the 2035-36 financial years?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2012 Year ending 30 June 2024
Year ended 30 June 2013 Year ending 30 June 2025
Year ending 30 June 2014 Year ending 30 June 2026
Year ending 30 June 2015 Year ending 30 June 2027
Year ending 30 June 2016 Year ending 30 June 2028
Year ending 30 June 2017 Year ending 30 June 2029
Year ending 30 June 2018 Year ending 30 June 2030
Year ending 30 June 2019 Year ending 30 June 2031
Year ending 30 June 2020 Year ending 30 June 2032
Year ending 30 June 2021 Year ending 30 June 2033
Year ending 30 June 2022 Year ending 30 June 2034
Year ending 30 June 2023 Year ending 30 June 2035
Year ending 30 June 2036
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You have a plantation.
The technical aspects of the specific operation will be handled by expert consultants and contractors.
You will be involved with the ongoing maintenance of the plantation.
Your income for non-commercial loss purposes exceeds $250,000.
You have provided references to independent industry sources that the commercially viable period for your plantation is 25 years.
Relevant legislative provisions
Income Tax Assessment Act 1997 - section 35-1
Income Tax Assessment Act 1997 - subsection 35-10(2E)
Income Tax Assessment Act 1997 - subsection 35-55(1)
Income Tax Assessment Act 1997 - paragraph 35-55(1)(c)
Reasons for decision
For the 2009-10 and later financial years, Division 35 of the Income Tax Assessment Act 1997 will apply to defer a non-commercial loss from a business activity unless:
· you meet the income requirement and you pass one of the four tests
· the exceptions apply
· the Commissioner exercises his discretion.
In your situation, you do not satisfy the income requirement and do not come under any of the exceptions. Your business losses are therefore subject to the deferral rule.
The Commissioner's discretion may be exercised for the income year in question where:
· it is in the nature of your business activity that there will be a period before a tax profit can be produced
· there is an objective expectation your business activity will produce a tax profit within the commercially viable period for your industry.
Having regard to your full circumstances, it is accepted that it is in the nature of the business activity that has prevented you making a tax profit. It is also accepted that you will make a tax profit within the commercially viable period for your industry.
Consequently the Commissioner will exercise his discretion in the 2011-12 to 2035-36 financial years.