Private ruling: Commissioner’s discretion for non-commercial losses
Date of advice: 31 August 2018
Published: October 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 activity in the calculation of your taxable income for the 20XX-XX financial year? | 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. For more information on non-commercial losses, please visit www.ato.gov.au and search quick code QC 33774.

Relevant facts and circumstances: You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. The reason for not meeting the income requirement was due to bonuses received, which you do not expect to occur in future years. You carry on a primary production business which commenced in 20XX. You commenced business operations in the 20XX-XX financial year. You have passed the real property test in the 20XX-XX financial year. Whilst you have not provided independent evidence that attests to a commercially viable period for your industry, we can confirm that the currently accepted lead time for your industry is one to two years (for a business in your industry to reach a commercial crop after commencement). You intend to make a tax profit in the 20XX-XX financial year. You expect to pass the assessable income test and real property test in the 20XX-XX financial year, and you also expect to satisfy the income requirement 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)(c)