Private ruling: Non-commercial business losses and the Commissioner’s discretion
Date of advice: 5 December 2018
Published: March 2019
Ruling period: Financial year ended 30 June 2017 | Financial year ended 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the Commissioner exercise his discretion to allow you to include any losses from your primary production business activity in the calculation of your taxable income for the 2016-17 and 2017-18 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 pass a test or 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 satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the Income Tax Assessment Act 1997 . You purchased an farm (the activity) as a going concern, but in poor condition, in the 20XX-XX financial year. The activity covers X acres and contains X trees that were planted in 20XX. You engaged an agronomist to provide professional advice on the most effective way to get the property, back to full production. You were advised that no product should be harvested in the 20XX-XX and 20XX-XX financial years, and all efforts and funds should be put into restoring the activity to full health and production. The significant labour and resources allocated to the activity in the 20XX-XX financial year, along with your water license which allows access to up to XX megalitres, will assist in bringing the property back to full commercial yield by the 20XX-XX financial year. You have provided projected profit and loss figures which indicate that the activity will pass the $20,000 assessable income test in the 20XX-XX financial year. It is acknowledged that there is a lead time of X years until full yield for your industry.

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)