Private ruling: Non-commercial losses - lead time
Date of advice: 4 October 2022
Published: December 2022
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

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 cattle farming business in your calculation of taxable income for the 20XX-XX income year? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner will exercise his discretion to allow you to include any losses from your business activity in the calculation of your taxable income for the year ended 30 June 20XX. It is accepted that there is a 'lead time' in the nature of your activity and it will make a tax profit within the commercially viable period for the industry concerned. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au.

Relevant facts and circumstances: You operate a primary production business which operates as a cattle farm. You commenced your business in the year beginning 1 July 20XX. You did not satisfy the less than $250,000 income requirement as set out in subsection 35-10(2E) of the ITAA 1997. You purchased the property with the intent to raise, fatten and sell livestock. You have repaired fencing, tracks and worked to ensure adequate water was available to hold stock for a period to fatten for future sale. You purchased a number of cattle for the purpose of operating a cattle farm in the year ending 30 June 20XX. You purchased addition cattle for the purpose of operating a cattle farm in the year ending 30 June 20XX. You have provided your cash flow projections for the year ended 30 June 20XX to the year ending 30 June 20XX and your profit and loss projections for the year ended 30 June 20XX. You have provided an independent report that opinions your business will qualify as a primary producer for taxation purposes though meeting the assessable income test. The report also opinions your business will be profitable within a commercially viable period. You anticipate that the business will produce a profit in the year ended 30 June 20XX.

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)