Private ruling: Commissioner discretion - non-commercial losses
Date of advice: 10 June 2025
Published: 11 August 2025
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 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 under section 35-55 of the Income Tax Assessment Act 1997 to allow you to include any losses from your primary production business activity in the calculation of your taxable income for the 2020-2027 financial years? | A1: Yes. The Commissioner is satisfied that your activity is carried on as a business. Having regard to your full circumstances, it is accepted that 'because of its nature' the business activity 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 ten-year period for your industry.

Relevant facts and circumstances: You have taken over on a primary production business as a sole trader. You have planted the crop and waiting for the crop to establish significant growth to allow for harvest to occur. The crop has been affected by drought and predators, delaying growth. Your spouse passed away and whilst dealing with the aftermath the expected crop was further delayed. You have undertaken education to improve the crop. You have maintained the same cultivation model; this technique may not yield results for X years. Once sufficient crops are produced from the existing plantings you intend to expand the orchard further, by adding further trees. Before that happens, however, the existing plantings must turn a profit. You have a business plan. Your activity is of sufficient scale to be able to produce a profit as set out in your business plan you have provided, showing potential production and income and expenses. Your business does not satisfy the 'other assets test", however the business does have pre- additional and additional capital investment. Your income for non-commercial loss purposes in the income year prior to the income year for this application was received by the Commissioner was less than $XX.

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)(a)