Private ruling: Non-commercial losses - lead time
Date of advice: 17 May 2023
Published: 3 July 2023
Ruling period: 1 July 20XX to 30 June 20CC
Date scheme commenced: 1 April 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 Business Activity 1 in your calculation of taxable income for the 20XX-XX to 20CC-CC 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 year ended 30 June 20XX onwards till the year ending 30 June 20CC. 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. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au. | Q2: Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the ITAA 1997 to allow you to include any losses from Business Activity 2 in your calculation of taxable income for the 20XX-XX to 20XX-XX income years? | A2: 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 year ended 30 June 20XX onwards till the year ending 30 June 20XX. 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. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au.

Relevant facts and circumstances: You operate a primary production business which operates 2 business activities. The property has attributes that lend itself to the relevant activities. You created a detailed business plan. You prepared earthworks and drainage. You conducted various activities to prepare the land for Business Activity 1 installing an irrigation system. You plan to do additional soil tests and will make further adjustments if needed. You plan to have a second installation of irrigation equipment in 20XX. You expect Business Activity 1 to be productive for at least 30 years. You provided projections showing a profit from Business Activity 1. You prepared the land for Business Activity 2 by repairing the fencing. You joined an association relevant to Business Activity 2. You provided projections showing a profit for Business Activity 2. You sought advice from relevant industry experts.

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 paragraph 35-55(1)(b)