Private ruling: Non-commercial losses - lead time
Date of advice: 19 March 2024
Published: 29 April 2024
Ruling period: Period ended 30 June 2023 | Period ending 30 June 2024 | Period ending 30 June 2025 | Period ending 30 June 2026
Date scheme commenced: 1 July 2022

Ruling: Q1: Will the Commissioner exercise his 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 activity in the calculation of your taxable income for the 2022-23 - 2025-26 financial years? | 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 business activity and you will make a tax profit within your industry's commercially viable period. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au.

Relevant facts and circumstances: You and your spouse operate a primary production business as a partnership, of breeding and fattening livestock on a farm in regional Australia. You do not satisfy the $250,000 income requirement outlined under subsection 35-10(2E) of the ITAA 1997. You commenced business operation in the 2021-2022 financial year, where you purchased commercial farmland. The farmland has a sizeable rainfall area, with four permanent stock dams and a 165GPH bore. You presently have a herd of XXX head. You intend to undertake your business activity in using ethical and sustainable practices, to produce high quality product for your local community. You have provided financial statements and realistic profit/loss projections that outline that you will produce a tax profit by the 2025-26 financial year. This timeline is within the industry standard period of 2-5 years and has been supported by independent substantiation sourced from an industry professional.

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)