Private ruling: Non-commercial losses
Date of advice: 11 October 2016
Published: December 2016
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

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 primary production business activity in your calculation of taxable income for the 20YY financial year? | A1: Yes.

Relevant facts and circumstances: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You commenced a primary production business activity during the 20YY financial year. You have submitted your profit projection demonstrating your intent to make a tax profit from these activities in the 20ZZ financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | 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)

Reasons for decision: Summary: Losses from activities that do not meet any of the four tests under Division 35 of the Income Tax Assessment Act 1997 (ITAA 1997), or the exception in subsection 35-10(4) of the ITAA 1997, will be subject to the loss deferral rule in subsection 35-10(2) of the ITAA 1997, unless the Commissioner exercises a discretion that it would be unreasonable to defer the loss. It is accepted that it is in the nature of your activity that there will be a lead time before a profit can be expected or one of the tests passed. It is accepted that meeting a test within two years of commencing your activities will be within a commercially viable period for your industry. The information you have provided demonstrates that there is an objective expectation that your business will make a profit in the 20ZZ financial year. Therefore, the Commissioner's discretion under paragraph 35-55(1)(b) has been granted for the 20YY financial year.