Private ruling: Non-commercial losses - lead time
Date of advice: 24 October 2022
Published: 9 January 2023
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | 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 the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your date tree business in your calculation of taxable income for the 20XX-XX to 20XX-XX income years? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner will exercise his discretion to allow you to include any losses from your business activity in the calculation of your taxable income for the year ended 30 June 20XX onwards till the year ending 30 June 20XX. 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 operate a primary production business which operates as a XXXXX plantation. You commenced your business 1 July 20XX. You will plant a number of XXX producing trees sufficient to operate a commercial business. You have purchased equipment for irrigation on the property and started construction on infrastructure for the plantation. You will manage the trees on your own until maturity where you intend to employ seasonal workers for picking and packaging. You have provided a letter from an independent party stating your business will be profitable within a commercially viable period. You have provided the forecast of revenue and expense for the year ended 30 June 20XX to the year ending 30 June 20XX. You anticipate that the business will produce a profit in the year ending 30 June 20XX.

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)