Private ruling: Non-commercial losses - lead time
Date of advice: 8 January 2026
Published: 2 March 2026
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: September XXXX

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your hardwood plantation activity in the calculation of your taxable income for the 20XX to 20XX financial years? | A1: Yes Having considered your circumstances and the relevant factors, we accept that there are sufficient grounds in your case to further extend the lead time that was previously granted for your hardwood plantation activity. On the basis of further information provided in relation to your hardwood plantations, taking into account independent advice on your industry, the Commissioner will exercise his discretion for the income years 20XX to 20XX.

Relevant facts and circumstances: On XX XXX XXXX you joined a farm forestry incentive scheme (the scheme) offered by your state government for a term of XX years. The scheme's aim was to establish hardwood plantation for sawlog production from cleared agriculture land. A site inspection for suitability was undertaken and implemented by the scheme organisers. On a specified date, your hardwood plantation (first plantation) was planted at the property at Xxx. The plantation comprised XX hectares, with approximately 1000 stems per hectare of shining gum and Tasmanian blue gum, intended for sawlog production. The scheme organisers estimated the plantation would be sufficiently advanced to harvest in 25 years based on particular conditions of rain and soil. In 20XX the Commissioner granted discretion under paragraph 35-55(1)(b) of the ITAA 1997 to allow you to claim losses from your hardwood plantation activity up to the 20XX income year. In 20YY you planted another Y-hectare plantation of hardwood trees endemic to the area (second plantation) at the property at Xxx. Your second plantation was also intended for sawlog production. The professional advice and schedule developed for the second plantation estimated it will reach commercial viability after 25 years of growth. In 20XX flood contributed to many of the shining gum in the first plantation dying from 'wet foot'. As part of hardwood growing, the plantation needs thinning, and the removed wood can be used for roundwood products, pulp, chips or posts. You engage contractors to select the trees for pruning and thinning. They also handle pruning, thinning, transport, and marketing of the removed wood. In the last income year, your first plantation was thinned and dead trees were removed, generating some income from thinning. The second plantation is due to be thinned and pruned. It is estimated to produce income of $X for the thinning at an estimated cost of $X. No further income is expected from either plantation until the trees mature and reach commercial viability. You will continue to incur operational and maintenance costs, such as weed spray and fertiliser, for maintaining and caring for the trees. You do not satisfy the under $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You applied for an extension to the lead time granted in the private ruling issued in 20XX to encompass the income years ending 30 June 20XX to 30 June 20XX. You provided independent evidence (report) from an expert affirming the millennium drought significantly affected the growth rate of the hardwood trees. The report concludes a further 12 to 15 years of growth is required to produce mature, commercially viable sawlogs. At present, the wood of the trees in the first plantation is not stable when milled. An independent source indicates that, under the conditions of your region, a hardwood plantation will require a growth period of: 15 to 30 years to reach commercial viability for pulplog production. 30 to 40 years to mature and reach commercial viability for sawlog quality. You expect your hardwood plantations will make a tax profit on reaching maturity for sawlog production in the 20XX income 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 subsection 35-10(2E) | Income Tax Assessment Act 1997 paragraph 35-55(1)(c)

Reasons for decision: Summary: The Commissioner's discretion under paragraph 35-55(1)(c) of the ITAA 1997 may apply to an individual who does not satisfy subsection 35-10(2E) when; because of the nature of the business activity it will not produce a tax profit, and there is an objective expectation, based on independent evidence, the activity will produce a tax profit within a period that is commercially viable for the industry concerned. Your hardwood plantation was part of a state government scheme entered into with the intention to produce quality sawlogs. The scheme projected the activity would be profitable after XX years of growth, but due to unfavourable drought conditions, the growth rate of your plantation has been affected. You provided expert advice that a further XX years of growth will enable the plantation to mature and produce commercially viable sawlogs . The production of hardwood sawlogs in your region is currently considered to require a growth period of 30 to 40 years for a hardwood plantation to reach commercial viability for sawlog production. Your requested extension to the previously granted lead time is still within the industry standard growth period typically required for hardwood plantations to mature for sawlog production. Therefore, the Commissioner will exercise his discretion under paragraph 35-55(1)(c) of the ITAA 1997 for the additional inco me years requested .