Private ruling: Non-commercial Losses lead time
Date of advice: 19 December 2024
Published: 28 January 2025
Ruling period: Year ended 30 June 20XX | 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 to allow you to include losses from your primary production business activity in the calculation of your taxable income for the 20XX-XX and 20XX-XX income years? | A1: Yes. Having regard to your full circumstances, it is accepted that 'because of its nature' your business activity has not or will not satisfy meeting one of the four tests but will do so in a commercially viable time for your industry. Consequently, the Commissioner will exercise his discretion in the 20XX-XX and 20XX-XX financial years to allow you to include any losses from your business activity in the calculation of your taxable income.

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 carry on a primary production business of growing produce. During the first year you cleared the property and prepared it ready for plantation of the relevant crop. You have planted patches of crops in 20XX and 20XX consisting of XXX at a time. You planted the last patch of crops in 20XX. These crops where from rootstock and had been grafted. At this time, you had an agronomist advised that the crops that have been planted will come into production in four to five years with full production to occur about three years after that. However, you have had the agronomist return to inspect the property and have been advised that the crops had suffered a bad bug during the original grafting period and had to undergo grafting again leading to a delay in production by a year. No income has been generated by the crops as they have not reached production age. The income and expenses projected for the 20XX-XX financial year has income being generated by the trees as they will have reached maturity. You expect to remain under the $XXX,XXX income requirement and pass one of the four tests within 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)(b)