Private ruling: On-commercial losses and Commissioner's discretion for special circumstances
Date of advice: 26 July 2017
Published: November 2017
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 August 2016

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 primary production business activity in your calculation of taxable income for the 2016-17 and 2017-18 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 in the 2016-17 and 2017-18 financial years. For more information on non-commercial losses, please visit our website ato.gov.au and enter quick code QC 33774 into the search bar at the top right of the page.

Relevant facts and circumstances: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a business as a sole trader. The business is primarily concerned with breeding stock. You commenced business operations in the 2016-17 financial year. You currently have X female stock on hand. These females will be ready for breeding from 12 to 18 months of age. The gestation period of the breed of female stock is 145 to 153 days. You have provided independent evidence that attests to a commercially viable period of two to three years for your industry. The majority of the breeding stock will be purchased in the 2017-18 financial year once fencing is fully completed. You plan on focusing on increasing the number of female stock for breeding to increase your breeding opportunities. Additions to bloodlines will occur every two years as further high quality genetic material become available. Sales will commence in the 2018-19 financial year with an estimated X sales at $X per head. Sales in the 2019-20 financial year will increase to Y sales at $X per head. Sales from the 2020-21 financial year will be approximately Z to A sales at $X per head You intend to make a tax profit in the 2018-19 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 subsection 35-10(2E), and | Income Tax Assessment Act 1997 paragraph 35-55(1)(c).