Private ruling: Non-commercial losses - Commissioner's discretion - lead time
Date of advice: 24 April 2020
Published: June 2020
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion to allow you to include any losses from your business activity in the calculation of your taxable income for the 20Xx-XX to 20XX-XX financial years? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner will exercise his discretion. It is accepted that there is a 'lead time' in the nature of your activity and it will make a tax profit within the commercially viable period for the industry concerned. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au

Relevant facts and circumstances: You will not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997 in the 2019-20 financial year; however, you will satisfy it in the 2020-21 and 2021-2022 financial years. During the 20XX-XX financial year you formed a partnership with your spouse in order to commence the activity. An agronomist with whom you have been working closely has advised that farms similar to what you have planned operate successfully within the area and that there is nothing overly negative which will affect the future viability of your farm if it is operated in a manner based on standard industry practice. You have ordered and paid a deposit for X trees but due to a shortage of trees you have to wait until MM/YYY before they arrive for planting. You have purchased equipment and commenced preparing the land ready for planting. You will be purchasing more equipment and installing irrigation in the coming months. You have provided evidence which indicates that commercial quantities can be harvested approximately three years after planting, and the commercially viable period for making profits is six to seven years. You have provided profit and loss statements projecting that the activity will be profitable in 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)