Private ruling: Commissioner discretion - non commercial losses
Date of advice: 7 May 2024
Published: 17 June 2024
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

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 the loss from your activity in the calculation of your taxable income for the 20YY-YY financial year? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner has granted his discretion. It is accepted there is a 'lead time' in the nature of your XXXX business activity that has prevented you from making a tax profit in the 20YY-YY financial year. It is also accepted that your business activity will meet one of the 4 tests and make a tax profit in the 20YY-YY financial year which is within the commercially viable period for your industry.

Relevant facts and circumstances: You have been operating a partnership with your spouse for over 20 years. Initially it was a XXXX operation. The partnership has transitioned from XXXX farming to XXXX grazing for market and fodder growing for selling. In the 20YY-YY financial year the first XXXX were bought and sold. A second head of XXXX were purchased in the 20YY-YY financial year and sold in the 20YY-YY financial year. You have purchased more XXXX in the 20YY-YY financial year and in the 20YY-YY financial year. You are purchasing XXXX between six to twelve months of age and grazing them on the property for a total of twelve months to grow and be sold. Once the XXXX are sold, new XXXX are then purchased. The intention is to have a rolling XXXX of XXXX. You currently have a business agreement in place for selling the XXXX to an XXXX. The XXXX XXXX are currently fed on the fodder grown on the property and pastures. The fodder is two types of XXXX, which from plating to harvest to sale of crops can be as short as 6 weeks depending on the season. This fodder was used to feed the XXXX, but after selling the XXXX continued to grow the fodder and sell the product externally. You did not satisfy the $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997 for the 20YY-YY financial year. The partnership made a profit in previous financial years. A net loss arose from the activity in the 20YY-YY financial year. Information that has been provided shows that a profit has been made in the 20YY-YY financial year and continues to increase with each year. The market value of your assets is estimated to be in excess of $100,000.

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)