Private ruling: Commissioner's discretion - non-commercial losses
Date of advice: 11 July 2024
Published: 19 August 2024
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

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 year ending 30 June 20YY? | 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 year ending 30 June 20YY.

Relevant facts and circumstances: You do not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a primary production business. The business is operated in a partnership. You commenced business operations in the year ended 30 June 20YY. Trees were planted in the YYYY, YYYY, YYYY and YYYY financial years. The business currently employs 10 staff but has employed many staff during the planting stages and will employ many more when the produce are ready to pick. The business sells trays of fruit it produces to wholesalers. The trees take time to grow in size and mature, before crops can be set, held and harvested from the tree. You have provided independent evidence that attests to a commercially viable period of 6-7 years for your industry. The respective trees should start to yield small crops in year 3 and increase to near full production by year 7. You previously intended to make a tax profit in the year ended 30 June 20YY. You intend to make a tax profit in the year ending 30 June 20YY which is within the commercially viable period for your industry.

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)