Private ruling: Commissioner’s discretion for non-commercial losses
Date of advice: 11 December 2017
Published: April 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your primary production activity in your calculation of taxable income for the 2016-2017 financial year? | A1: Yes Having regard to your full circumstances, it is accepted that it is in the nature of the business activity that has prevented one of the four tests being passed. It is also accepted that you will pass one of the four tests or make a tax profit within the commercially viable period for your industry. Consequently the Commissioner will exercise his discretion in the 2016-2017 financial year. For more information on non-commercial losses, please visit our website at ato.gov.au and search for quick code QC 33774.

Relevant facts and circumstances: Your income for non-commercial loss purposes for the financial year 2016-2017 and 2017-18 is less than $250,000. You are carrying on a business of growing a produce which commenced on in early 2016. The farm has a large number of plants on a number of hectares of leased land. The land has never been farmed on previously. You are a member of a local cooperative which sells your produce for a fee. You have incurred significant costs establishing your business, include netting to protect the plants from birds, tractors, cost of plants and spray units. Full production occurs in three to four years, with each mature four year old plant producing an average of 4kgs of fruit. You have included a projected profit and loss statement which shows you will pass the $20,000 assessable income test in the 2017-18 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) | Income Tax Assessment Act 1997 paragraph 35-55(1)(b)