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Edited version of private advice
Authorisation Number: 1051908373698
Date of advice: 21 October 2021
Ruling
Subject: Commissioner's discretion - non-commercial loss
Question
Will the Commissioner exercise his discretion to allow you to include any losses from your business activity in the calculation of your taxable income for the financial year ended 30 June 20XX?
Answer
Yes
Having regard to your full circumstances, it is accepted that it is the short lead time that has prevented you making a tax profit. You had only just started the business as a sole trader just prior to the end of financial year and had to acquire capital assets to start the activity (Taxation Ruling TR 2007/6 paragraph 23). It is also accepted that you will make a tax profit in the following financial year. Consequently, the Commissioner will exercise his discretion in the financial year ended 30 June 20XX.
This ruling applies for the following period:
Financial year ended 30 June 20XX
The scheme commences on:
25 May 20XX
Relevant facts and circumstances
You operate as a sole trader X weeks prior to the end of the financial year. You run a number of regional government contracts to provide services to regional people at a number of locations within the state. The numerous contracts require you to purchase vehicles and you employ a number of drivers to operate them. These contracts generate a profit for each full year of operation.
Previously this was operated as a partnership. The partnership was required to be wound up, part of the partnership operations and some business assets were required to be sold during the financial year. The sale of part of its operations and some of these business assets resulted in an increased partnership profit compared to previous years. Your share of this profit was more than $XXX.
The partnership was dissolved near the end of the financial year.
You had to purchase vehicles for the business to start the activity as a sole trader following the dissolution of the partnership.
The temporary full expensing deduction was utilised. Your business made a loss in the financial year ended 30 June 20XX but you made a tax profit in the following financial year.
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 subsection 35-10(2E)