Private ruling: Non-commercial losses - lead time
Date of advice: 6 September 2023
Published: 16 October 2023
Ruling period: 2021-22 to 2022-23 financial years
Date scheme commenced: 2021-22 financial year

Ruling: Q1: Will the Commissioner exercise the 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 your calculation of taxable income for the relevant financial years? | A1: Yes. Having regard to your full circumstances, it is accepted that it is the nature of the business activity that has prevented one of the four tests being passed. It is also accepted that you will pass one of the four tests or make a tax profit within the commercially viable period for your industry. Consequently, the Commissioner will exercise his discretion in the relevant financial years.

Relevant facts and circumstances: You satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997 The business is a cattle breeding farm located in State A. You commenced business operations in the 2021-22 financial year. The business has purchased cattle and has successfully produced calves within the first year of business. These cows have been registered with the required association. The business intends to have a commercial quantity of breeding cows by the end of the year with the intention to make a profit in the future year. There are currently several cattle that have been tested for pregnancy and are due to calf later early in the new financial year. You have provided independent evidence that attests to a lead time that you have nominated for your industry. You have also provided third party information to support the expected sale price of each cow once ready for sale. You have provided information to show that within the commercially viable you will make a tax profit.

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)