Private ruling: Non-commercial losses
Date of advice: 5 July 2017
Published: October 2017
Ruling period: Year ended 30 June 20VV | Year ending 30 June 20WW
Date scheme commenced: 1 July 20UU

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 activity in your calculation of taxable income for the 20UU-VV to 20WW-XX 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 20UU-VV to 20VV-WW 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: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You are carrying on a business (the activity) which commenced in the 20UU-VV financial year. You are currently focused on increasing production in particular line. This is at the expense of other production. This will allow you to reach the critical number in this production line, providing a profit from the base expenditure. You have sold about xxkg, approximately xxkg has been allocated for trial production. You have provided a profit and loss forecast for the 20UU-VV to 20YY-ZZ financial years. You intend to make $20,000 in assessable income in the 20WW-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)