Private ruling: Non-commercial losses
Published: May 2015
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2014

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 primary production activity in your calculation of taxable income for the years ended 30 June 2015 to 30 June 2018, inclusive? | A1: Yes.

Relevant facts and circumstances: You operate a primary production activity as a sole proprietor. You commenced your activity prior to 1 July 2014. You have provided independent evidence that the lead time for your activity to reach commercially viable levels is between 10 and 15 years. Your business plan states you expect to achieve a tax profit in the year ended 30 June 2019 which is within the independently assessed lead time. You will not meet the income requirement set out in subsection 35-10(2E) of the ITAA 1997.

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)

Reasons for decision: Summary: For the 2009-10 and later income years, Division 35 of the ITAA 1997 will apply to defer a non-commercial loss from a business activity unless: • you satisfy the income requirement and you pass one of the four tests, • the exceptions apply, or • the Commissioner exercises the discretion. In your situation, you do not satisfy the income requirement and you do not come under any of the exceptions. The relevant discretion may be exercised for the income year in question where: • it is in the nature of your business activity that there will be a period before a tax profit can be produced • there is an objective expectation your business activity will produce a tax profit within the commercially viable period for your industry. 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 the discretion for the years ended 30 June 2014 to 30 June 2018, inclusive.