Private ruling: Commissioner’s discretion for non-commercial losses
Date of advice: 29 June 2018
Published: September 2018
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 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 your business in your calculation of taxable income? | A1: Yes Having regard to your full circumstances, it is accepted that it is in 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 for the 20XX-XX financial year.

Relevant facts and circumstances: You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a primary production business which commenced in YYYY. Your 20XX-XX year income included a capital gain from the sale of an asset that was not used as part of your business activity, and this contributed to you not satisfying the <$250,000 income requirement. In future years you do expect to satisfy the <$250,000 income requirement. You expect to pass the real property test and other assets test in the 20XX-XX financial year. You have listed a lead time of three to four years for your industry; however you have not provided independent evidence that attests to this lead time. However, whilst you have not provided independent evidence that attests to the lead time of three to four years, we can confirm that the currently accepted lead time for your industry is two to three years (for a business in your industry to reach a commercial level). You intend to make a tax profit in the 20XX-XX 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)