Private ruling: Non-commercial losses
Date of advice: 31 August 2017
Published: December 2017
Ruling period: Year ended 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2016

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 production activity in your calculation of taxable income for the 2016-17, 2017-18 and 2018-19 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 in the 2016-17, 2017-18 and 2018-19 financial years. For more information on non-commercial losses, please visit our website at ato.gov.au and search for quick code QC 33774.

Relevant facts and circumstances: Your income for non-commercial loss purposes for the financial year 2016-17, 2017-18 and 2018-19 is or is expected to be less than $250,000. You are carrying on a business (the activity) which commenced on DDMMYY. You plan on planting XXX trees on your land. Currently the expenses that have been incurred have been to get the land ready to plant the trees including irrigation, bore, electricity and earthworks. The trees have been ordered with deposits paid and are due for delivery in 2017. In 2019-20 financial year you expect to get a 60% yield on the property on which trees were planted. A total yield of 100% is expected in 5 years (2021-22). You expect to make $20,000 in assessable income in the 2019-20 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)