Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

asked the Minister representing the Treasurer, upon notice, on 11 March 2011:

With reference to non commercial loss rules:

(1) How many applications has the Commissioner of Taxation received, in each of the past 3 financial years, from taxpayers who do not meet the $250 000 income test seeking a private ruling to allow them to offset business losses against other income.

(2) How many of these have been resolved in the taxpayer's favour.

(3) What criteria does the Commissioner use to decide whether a taxpayer, who does not pass the $250 000 income test, can nevertheless offset business losses against other income.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

The Treasurer has provided the following answer to the honourable senator's question:

(1) To date the Commissioner has received approximately 175 private ruling requests from individuals who did not meet the income test. The income test requirement only applies to the 2009-10 income year onwards. Prior to this, individuals did not have to meet the income test.

(2) Approximately 29 of the 93 finalised rulings to date have been resolved in the taxpayer's favour. A further 18 of these finalised private ruling applications were withdrawn or allowed in part.

(3) The legislation sets out the two criteria that the Commissioner takes into account in determining whether a loss can be claimed where the income test is not met; the special circumstances test and the lead time test.

The special circumstances test deals with situations outside the taxpayer's control that have prevented a taxpayer from making a profit in a particular year from the relevant business activity. Special circumstances include such things as drought, floods, bushfires or other natural disasters.

The lead time test takes into account situations where a natural consequence of the type of business activity is that in the early years of operation the income from the business is unlikely to exceed the costs incurred. For example, if it normally takes seven years for an olive grove to produce a commercial crop and the taxpayer can demonstrate they will make a profit at that time, the discretion may be exercised to allow the losses in the earlier years.