Private ruling: Non-commercial business losses and the Commissioner’s discretion
Date of advice: 12 July 2018
Published: September 2018
Ruling period: year ending 30 June 2016 | year ending 30 June 2017 | year ending 30 June 2018
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 to allow you to include any losses from your mixed farming business (the activity) in the calculation of your taxable income for the 2015-16 to 2017-18 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 2015-16 to 2017-18 financial years. For more information on non-commercial losses, please visit www.ato.gov.au and search quick code QC 33774.

Relevant facts and circumstances: You carry on a mixed farming activity under a partnership arrangement. The activity consists of product A and product B. Product A You planted product A in multiple stages, commencing in the 2015-16 financial year and ending in the 2017-18 financial year. You have provided independent evidence from the Relevant Department, in State A, showing that your variety of product A generally takes three to four years to flower, with full yield being achieved in years four to five. Your first yield will commence in the 2019-20 financial year, with full yield being achieved by the 2021-22 financial year. Product B You established your first product B crop in the 2016-17 financial year, and replanted that seed stock in the 2017-18 financial year. You expect to generate more than $20,000 in assessable income from the 2017-18 crop in the 2018-19 financial year. Your income for non-commercial loss purposes is less than $250,000 for the relevant financial years. Your spouse has assessable income of less than $40,000 for the financial years you are undertaking the activity.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 35-1 | Income Tax Assessment Act 1997 Subsection 35-10(2E) | Income Tax Assessment Act 1997 Paragraph 35-55(1)(b).