Private ruling: Commissioner's discretion for non-commercial business losses
Date of advice: 20 August 2021
Published: November 2021
Ruling period: Financial year ending 30 June 20XX | Financial year ending 30 June 20XX | Financial year ending 30 June 20XX | Financial year ending 30 June 20XX | Financial year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your business activity in your calculation of taxable income for the 20XX to 20XX financial years? | A1: Yes Having regard to your full circumstances, it is accepted that it is 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 to 20XX financial years financial years.

Relevant facts and circumstances: You do not satisfy the $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You and your partner purchased a property with a XXXX in 20XX. The previous owner of the property produced and sold XXX to other XXXmakers (the XXX activity). You and your partner continued with the XXX activity after the property purchase in 20XX. You and your partner then made XXXX improvements, undertook product research and purchased the necessary XXX making equipment. You and your partner produced your first small XXX batch in XX 20XX (the first XXX), to test the product and the potential market. The first XXX received acclaim from XXX reviews upon its release in 20XX. You and your partner produced your first commercial XXX batch in 20XX (the second XXX). You and your partner commenced selling the first XXX in 20XX. You and your partner commenced selling the second XXX in XX 20XX. Your XXX production remained static from 20XX to 20XX due to the poor weather condition that affected the yield of the XXX and the requirement of existing XXX sale contracts to sell some XXX. In XX 20XX, you and your partner applied for TFN and ABN for a partnership (the partnership). The partnership commenced increasing the XXX production in 20XX, including introduction of new product. The partnership is transitioning from selling XX% of the XXX to making all of the XXX into XXX. The partnership planned to expand the XXX sales to other states and territories. You provided independent evidence that attests to a commercially viable period of XX years for the XXX industry. In your case, with established XXXX, this can be reduced to XX years. You intend to make a tax profit from the 20XX 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)(c)


This ruling applies for the following period: