Private ruling: Non-commercial losses and the Commissioner’s discretion
Date of advice: 29 June 2018
Published: September 2018
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

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 business in your calculation of taxable income? | 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 20XX-XX to 20XX-XX financial years.

Relevant facts and circumstances: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a business of growing produce which commenced in YYYY. You currently have a one acre plot planted, and you are aiming to increase your seed stock for the 20XX growing season. You expect to have a four to five acre plot by the 20XX-XX financial year. You have incurred significant expenses that relate to your business activity. You have listed a lead time of five years for your industry; however you have not provided independent evidence that attests to this lead time. However, whilst you have not provided independent evidence that attests to the lead time of five years, we can confirm that the currently accepted lead time for your industry is three to four years (for a business in your industry to grow and replant seed stock to reach a small commercial crop). You intend to make $20,000 in assessable income in the 2019-20 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)