Private ruling: Non-commercial loss
Date of advice: 3 June 2026
Published: 17 August 2026
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20YY

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 losses from your business in the calculation of your taxable income for each of the income years 20XX to 20XX? | A1: Yes.

Relevant facts and circumstances: You commenced a non-primary production business during 20XX as a sole trader. Your business operates within a thriving industry with a strong total assessable market. You commenced development work on your product several years ago. You spend approximately XX hours a week on your business activities. You are highly experienced with extensive expertise in the industry as detailed. You provided your business' phased strategic plan. You have not yet made a profit from the business because of the nature of the business. In your industry, the accepted number of years before an activity becomes commercially viable is X years. You provided evidence of this period from an independent source. You anticipate that your business will be profitable within the commercially viable period for your industry and detailed the reasons why. You estimated your annual tax profit revenue from various revenue streams. Your income for non-commercial loss purposes in the 20XX income year (the income year prior to the income year in which this application was received by the Commissioner), was more than $X.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 35 | Income Tax Assessment Act 1997 subparagraph 35-10(1)(a)(i) to (iv) | Income Tax Assessment Act 1997 subsection 35-10(2) | Income Tax Assessment Act 1997 subsection 35-10(2E) | Income Tax Assessment Act 1997 subsection 35-10(4) | Income Tax Assessment Act 1997 subsection 35-55(1) | Income Tax Assessment Act 1997 paragraph 35-55(1)(c)

Reasons for decision: Summary: All legislative references are to the Income Tax Assessment Act 1997 . Division 35 applies to defer losses from non-commercial business activities unless: • you meet the income requirement in subsection 35-10(2E) and you pass one of the four tests referred to in subparagraphs 35-10(1)(a)(i) to (iv); or • the exception in subsection 35-10(4) applies; or • the Commissioner exercises the discretion under section 35-55 to not defer the losses (subsection 35-10(1) and (2)). You do not meet the income requirement as your income for the purposes of subsection 35-10(2E) for the most recent income year ending before your application was made is not less than $X. The exception in subsection 35-10(4) does not apply to you as your business is not a primary production business. Your business losses are therefore subject to the deferral rule under subsection 35-10(2) unless the Commissioner exercises the discretion. Where you do not satisfy the income requirement in subsection 35-10(2E), paragraph 35-55(1)(c) provides that the discretion may be exercised for the income years in question where the Commissioner is satisfied that: • it is because of its nature that your business activity will not produce assessable income greater than the deductions attributable to it; and • there is an objective expectation, based on evidence from independent sources (where available), that your business activity will produce a tax profit within the commercially viable period for your industry. Having regard to your facts and circumstances and the principles set out in Taxation Ruling TR 2007/6 Income tax: non-commercial business losses: Commissioner's discretion , we accept that it is the nature of your business activities that will prevent you from making a tax profit in the income years 20XX through to 20XX. We also accept the expectation that your business activities will produce an overall tax profit within the commercially viable period for your industry. Accordingly, the Commissioner will exercise the discretion under paragraph 35-55(1)(c) for the income years you make a tax loss from carrying on your business during the period 1 July 20XX to 30 June 20XX. This means you can offset losses from your business in those income years against your other assessable income.