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Edited version of private advice
Authorisation Number: 1012677333263
Ruling
Subject: Non-commercial losses and the Commissioner's discretion
Question
Will the Commissioner exercise the discretion under paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include losses from primary production activity in the calculation of your taxable income for the 2013-14 to 2020-21 financial years?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 30 June 2019
Year ended 30 June 2020
Year ended 30 June 2021
The scheme commenced on
1 January 2014
Relevant facts
You and your spouse are partners in a partnership.
You planted seedlings and since then, you have undertaken another similar planting.
You have provided web based evidence to show that the seedlings can start producing in 6 to 8 years but may take 10 to 12 years on poor soils with full production by 40 years. .
You expect produce a profit from the activity in the 2021-22 financial year.
You satisfy the income requirement; you do not satisfy any of the four tests and the exceptions do not apply.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 35-55
Income Tax Assessment Act 1997 Paragraph 35-55(1)(b)
Reasons for decision
For the 2009-10 and later income years, Division 35 of the ITAA 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.
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 accepted that it is in the nature of the business activity that has prevented one of the four tests being passed. It is also accepted that you will pass one of the four tests or make a tax profit within the commercially viable period for your industry.
Consequently the Commissioner will exercise his discretion in the 2013-14 to 2020-21 financial years.