Edited version of private advice

Authorisation Number: 1052230087582

Date of advice: 12 March 2024

Ruling

Subject: Commissioner discretion - non commercial losses

Question

Will the Commissioner exercise the discretion in paragraph 35-55(1)b and 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your enterprise in the calculation of your taxable income?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were granted a private ruling for Commissioners discretion for non-commercial business losses for the income years 1 July 20XX to 30 June 20XX.

During the period, XX and XX (You) had individual income for non-commercial loss purposes of more than $XXX in some years and less than $XXX in other years.

Your business activity commenced on XX.

You own a property which consists of XX hectares.

You have planted XX for the production of high XX on XX hectares of the property.

The remainder of the property is to be used for a XX farming enterprise.

The whole property will be used to earn income for providing XXXXXX.

Under the prevailing climate and soil conditions at the site the accepted time frame before harvesting XX is XX years.

Legislative provisions

Income Tax Assessment Act 1997 Division 35

Reasons for decision

For the 20YY-YY and later financial years, Division 35 of the ITAA 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, in the years when you do not satisfy the income requirement (that is, your taxable income, reportable fringe benefits and reportable superannuation contributions but excluding your business losses, exceeds $XXXX) and do not come under any of the exceptions. Your business losses are subject to the deferral rule unless the Commissioner exercises his discretion.

The relevant discretion may be exercised for the income years (where the income requirement is not met) 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 20XX - 20XX financial years.