Private ruling: Non-commercial losses
Date of advice: 16 July 2020
Published: August 2020
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 June 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 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 legislative provisions: Income Tax Assessment Act 1997 section 35-1 | Income Tax Assessment Act 1997 subsection 35-10 | Income Tax Assessment Act 1997 subsection 35-55(1) | Income Tax Assessment Act 1997 paragraph 35-55(1)(b)


Relevant facts: You have commenced a sole trader primary production business activity growing produce. | Your property has gently sloping land with a farmhouse and sheds, the open and level paddocks are perfect for growing. | You have over XX years of experience in the industry and you have knowledge of what is demanded by the market, both domestic and international. | Produce harvesting will occur at slightly different times of the year which will spread the workload and labour consistently across the year and should make for a more consistent cash flow. This will also provide the business with some protection from the effects of market fluctuations or disease by not having all its production in one item, spreading the risk. | After land preparation is completed, the first phase of planting will commence in the 20XX-XX financial year with harvesting to commence in the 20XX-XX financial year. The second phase of planting will commence in 20XX-XX. | Income projections provided show you will meet the $20,000 assessable income test in your first year of harvest in the 20XX-XX financial year. | You satisfy the $250,000 income requirement in subsection 35-10(2E) of the Income Tax Assessment Act 1997 for non-commercial loss purposes in the 20XX-XX financial year.