Private ruling: Non-commercial losses and the Commissioner’s discretion
Date of advice: 24 November 2017
Published: April 2018
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2016

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 primary production business activities in your calculation of taxable income for the 2016-17 to 2018-19 financial years? | A1: Yes. Having regard to your full circumstances, it is accepted that it is in the nature of the business activity that has prevented you making a tax profit. It is also accepted that you will make a tax profit within the commercially viable period for your industry. Consequently the Commissioner will exercise his discretion for the 2016-17 to 2018-19 financial years. For more information on non-commercial losses, please visit our website www.ato.gov.au and enter quick code QC 33774 in the search area at the top of the page.

Relevant facts and circumstances: You do not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You commenced a primary production business in XXXX. You began the activity by purchasing and planting a number of trees in the xxxx financial year. You plan to increase the trees in the next financial year. You have also inherited a number older trees which were located on the property; however these trees were in a rundown state and needed to be stag horned. You advised that there is a lead time of x years from when the trees are planted, to when they will start to bear fruit. As such you expect the activity to incur losses for a number of years. You have provided a projected profit and loss statement which indicates that the business will be profitable by the XXXX financial year.

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 S ubsection 35-10(2E) | Income Tax Assessment Act 1997 Paragraph 35-55(1)(c)