Private ruling: The Commissioner's discretion for non-commercial business losses
Date of advice: 25 June 2015
Published: June 2015
Ruling period: Year ended 30 June 2015 to year ended 30 June 2040
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Commissioner exercise the discretion in section 35-55 of the Income Tax Assessment Act 1997 to allow you to include any losses from your plantation business activity in the calculation of your taxable income for the 2014-15 to 2039-40 financial years? | A1: Yes.

Relevant facts and circumstances: You have purchased a large property and have commenced a primary production plantation. The business plan indicates that the multi-purpose plantation will consist of a total of XX hectares of high quality timbers. You have engaged the services of a professional to provide a detailed design report and forecasting for the first area to be planted. A professional will be managing the project on your behalf. The business will produce assessable income in years 2022 and 2030 from the thinning process, and the harvest of the final crop in 2039. Over the life of the 25 year business plan you expect to make a net profit. You have provided independent evidence that attests to a lead time of 25 years for your industry. Your income for non-commercial loss purposes is in excess of $250,000.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 35-1 | Income Tax Assessment Act 1997 - Subsection 35-10(2E) | Income Tax Assessment Act 1997 - Section 35-55.

Reasons for decision: Summary: You have requested the Commissioner to exercise his 'lead time' discretion for the 2014-15 to 2039-40 financial years so that you are not required to defer any losses from your timber plantation business activity under the non-commercial loss provisions. The 'lead time' discretion may be exercised for the income years in question where: • it is in the nature of your business activity that there will be a period before a tax profit can be produced; and • there is an objective expectation your business activity will produce a tax profit within the commercially viable period for your industry. Having regard to your full circumstances, it is accepted that any losses in the years in question will be the result of the nature of the business activity. 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 for the 2014-15 to 2039-40 financial years.