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Edited version of your private ruling
Authorisation Number: 1012604827187
Ruling
Subject: Division 35 of the Income Tax Assessment Act 1997 (ITTA 1997)
Question
Are your business activities considered to be businesses of 'a similar kind' in relation to Division 35 of the Income Tax Assessment Act 1997?
Answer:
Yes
This ruling applies for the following periods
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2009
Relevant facts
You carry on two business activities.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 35-10
Income Tax Assessment Act 1997 Subsection 35-10(2E)
Income Tax Assessment Act 1997 Section 35-55
Income Tax Assessment Act 1997 Section 35-55(1)
Reasons for decision
Division 35 of the Income Tax Assessment Act 1997 (ITAA 1997) prevents losses being offset against other assessable income in the year the loss is incurred. The loss is deferred. The deferred losses may be offset in later years against profits from the activity.
The deferred losses may also be offset against other income if the income requirement and one of the other tests are satisfied, or the Commissioner exercises his discretion.
Division 35 of the ITAA 1997 applies to individuals, either alone, or in partnership where a business is carried on.
For the purposes of applying Division 35 of the ITAA 1997, subsection 35-10(3) of the ITAA 1997 allows you to group business activities 'of a similar kind'.
Determining whether business activities are of a similar kind
Subsection 35-10(3) of the ITAA 1997 states in applying this Division (Division 35) you may group together business activities of a similar kind. In certain situations the taxpayers business activities may be so discrete in character and in the manner they are conducted that the question arises whether they are carrying on separate and distinct business activities for Division 35 purposes. Whether this is so, is clearly a question of fact.
In deciding similarity of business activities it does not require exact identity. As discussed in paragraph 51 of Taxation Ruling TR 2001/14, determining whether business activities are of a similar kind to one another will involve comparing and contrasting them in relation to characteristics such as:
• The location(s) where they are carried on
• The type(s) of goods and/or services provided
• The market condition(s) in which those goods and/or services are traded
• The type(s) of assets employed in each
• Any other features affecting the manner in which the activities are conducted.
Some of these characteristics may be the same for the business activities being compared however, some difference must always be expected. The presence or absence of similarity in respect of a single characteristic will rarely be determinative (Goodfellow v. FC of T 77 ATC 4086 at 4094; (1977) 7 ATR 265 at 274). As overall comparison of the separate business activities will be called for, weighing up the extent of the characteristics which are the same or similar against those where there are significant differences.
Based on the information you have provided it considered that these two activities are of a similar kind and are able to be grouped together under section 35-10(3) of the ITAA 1997.