Private ruling: Non-Commercial Losses
Date of advice: 25 January 2018
Published: May 2018
Ruling period: Year ended 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30June 2022 | Year ending 30 June 2023
Date scheme commenced: 1 July 2016

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 primary production activity in your calculation of taxable income for the 20XX-XX to 20XX-XX financial years? | A1: Yes Having regard to your full circumstances, it is accepted that it is in the nature of the business activity that has prevented you making a tax profit. 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 in the 20XX-XX to 20XX-XX financial years. 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 years 20XX-XX to 20XX-XX is more than $250,000. You are carrying on a business (the activity) which commenced in the 20XX-XX financial year. You commenced your business in June 20XX. You have purchased xx trees which were grafted and stored at a nursery until the farm was ready to plant and leased x acres of land. In July 20XX you leased further acres of land and paid a deposit on more trees. Significant costs were incurred with preparation of the farm for planting from July to September, including soil contouring to suit the way trees are planted. Half of the trees for one of the properties were planted between October and December of 20XX. The rest are scheduled for planting between January and April 20XX. You are currently searching for further blocks to rent. Over the next two years you expect to add further acres to manage depending on the availability of suitable blocks. The independent evidence you provided from the Industry suggests that the commercially viable period is about six to seven years. You have provided income and expenditure projections which show you expect to make 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)