Private ruling: Non-commercial losses - Commissioner's discretion - lead time
Date of advice: 2 November 2022
Published: 9 January 2023
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: X November 20XX

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) (lead time) to allow you to include any losses from your livestock business in your calculation of taxable income for the 20XX-XX to 20XX-XX income years? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner will exercise his discretion to allow you to include any losses from your business activity in the calculation of your taxable income for the 20XX-XX, 20XX-XX, 20XX-XX and 20XX-XX income years. It is accepted that there is a 'lead time' in the nature of your activity and it will make a tax profit within the commercially viable period for the industry concerned. Please note that the ATO considers the commercially viable period for your industry to be X to X years.

Relevant facts and circumstances: You do not meet to <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You anticipate you will continue to not meet this requirement for the foreseeable future. You satisfy the other assets test set out in section 35-45 of the ITAA 1997 and the real property test set out in section 35-40 of the ITAA 1997. You are an individual and began operating an income producing activity involving livestock. You made a loss from this income producing activity. The income producing activity is operated on a property purchased by you. The property was previously used in a different primary production activity. You have spent significant amount of time converting the property into usable farmland suitable for livestock. You have purchased several livestock during the relevant year which is the amount recommended by the corresponding authority body to begin breeding. You have provided a budget and financial forecast and anticipate you will begin making a profit in the 20XX-XX income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 35-10 | Income Tax Assessment Act 1997 subsection 35-10(2E) | Income Tax Assessment Act 1997 section 35-40 | Income Tax Assessment Act 1997 section 35-45 | Income Tax Assessment Act 1997 section 35-55.