Private ruling: Non-commercial losses and the Commissioner’s discretion
Date of advice: 6 December 2017
Published: April 2018
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

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 business in the calculation of your taxable income for the 2015-16 to 2016-17 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 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 2015-16 to 2016-17 financial years. For more information on non-commercial losses, please visit our website www.ato.gov.au and enter quick code “QC 33774” in the search area at the top of the page.

Relevant facts and circumstances: You satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You have been carrying on a primary production hobby activity for a number of years. You gradually increased your herd of cattle and it is from this point you considered that you were carrying on a business of cattle breeding. You plan to increase the herd of cattle to XX by the XXXX-XX financial year. You advise there is a minimum two year period from heifer calves being born and producing their first calf. You have incurred losses for the XXXX-XX and XXXX-XX financial years. You have provided a projected profit and loss statement to confirm that the business will pass the assessable income test in the XXXX-XX financial year. The business will also be profitable in the same 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)