Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 19 December 2019
Published: February 2020
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
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 productionbusiness activity in your calculation of taxable income for the 2016-17 to 2020-21 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 for the 2016-17 to 2020-21 financial years.

Relevant facts and circumstances: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You commenced a primary production business activity growing produce in early 2016 where you planted a number of trees. You commenced another primary production business activity growing other produce in 2018 where you planted a number of trees. You then planted a further number of trees for both business activities in early 2020. You have grouped both of these business activities together for the purposes on the non-commercial loss provisions in Division 35 of the Income Tax Assessment Act 1997 . You have provided independent evidence from a government source which suggests the commercially viable period for the first business activity you commenced in 2016 is six years. You have also provided other independent evidence from a different source which suggests the commercially viable period for the second business activity you commenced in 2018 is up to five years. You have provided your projected number of produce to be harvested in the 2021-22 financial year along with the price per kilogram for your produce. Your profit and loss projections show that you intend to make $20,000 in assessable income (along with a tax profit) in the 2021-22 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)