Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 6 August 2020
Published: September 2020
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your primary productionbusiness activity in your calculation of taxable income for the 20XX-XX to 20XX-XX financial years? | A1: Yes. 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 for the 20XX-XX to 20XX-XX financial years. For more information on non-commercial losses, please visit www.ato.gov.au and search quick code QC 33774.

Relevant facts and circumstances: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a primary production business (growing produce) which commenced in the 20XX-XX financial year. Your eventual goal is to have over XXX trees planted, by following the approach below which was recommended to you by a local farmer in order to gain better results. You purchased a certain number of trees in the 20XX-XX financial year which were placed in a greenhouse for a period of time before they will be planted in the ground in the 20XX-XX financial year. You will purchase a further number of trees in the 20XX-XX financial year which will also be placed in a greenhouse for a period of time before they are planted in the ground in the 20XX-XX financial year. You will purchase a further number of trees in the 20XX-XX financial year which will be also placed in a greenhouse for a period of time before they are planted in the ground in the 20XX-XX financial year. You have provided independent evidence that attests to a lead time of three years for your industry. This evidence was sourced from an Australian Government authority, which confirms that commercial quantities of the produce you are growing are generally not harvested until the third year. You intend to make $XXX in assessable income in the 20XX-XX 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) | Income Tax Assessment Act 1997 paragraph 35-55(1)(b)