Private ruling: Non-commercial losses - lead time
Date of advice: 17 June 2022
Published: October 2022
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 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) (lead time) to allow you to include any losses from your livestock business in your calculation of taxable income for the 20XX-XX to 20XX-XX income years? | 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 20XX-XX, 20XX-XX and 20XX-XX income years. 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 are an individual who operates a livestock farm on a property owned by you. You have made a loss from your business activity. You have not satisfied one of the four tests. As the Property was largely unimproved at the time of purchase, you have since invested in capital improvements. Stock was purchased shortly after the acquisition of the property, and the first sale occurred within a couple of months. You intend on breeding up the cattle numbers. You have provided summaries of your business operations and profit forecasts which indicate that you expect to make a profit within the lead time. Your income for non-commercial loss purposes for the 20XX-XX financial year was more than $250,000. You anticipate that the business will produce a profit in the 20XX-XX 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)(c)