Private ruling: Ruling Non-commercial losses
Date of advice: 3 March 2020
Published: April 2020
Ruling period: Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 to allow you to include any losses from your meat and wool production business in the calculation of your taxable income for the 2019 and 2020 income years? | A1: Yes Having considered your circumstances and the relevant factors the Commissioner has granted his discretion. It is accepted that there is a 'lead time' in the nature of your business activity will be affected by drought conditions. It is considered you will pass the tests 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 facts and circumstances: You commenced your business activity in the 2017 income year. You operate a mixed business. You agist land from neighbours and intend on increasing your land holding in order to increase your stock numbers and produce. Your start-up costs include fencing, equipment and stock. The Bureau of Meteorology published data on drought in your region on 1 January 2017. You predict a profit in the 2021 income year. Due to drought conditions, you have had increasing fodder expenses each year since your business commenced. Your income for non-commercial loss purposes is predicted to be greater than $250,000 in the 2019 and 2020 income years. Independent evidence combined with information regarding the drought suggests a lead time of X years is applicable for the industry.

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 35-30 | Income Tax Assessment Act 1997 Paragraph 35-55(1)(b) | Income Tax Assessment Act 1997 Paragraph 35-55(1)(c)