Private ruling: non-commercial losses Commissioner's discretion for lead time
Published: September 2017
Ruling period: Year ended 30 June 20XX
Date scheme commenced: XX February 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 animal breeding business in the calculation of your taxable income for the 20XX-XX 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 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 financial year. For more information on non-commercial losses, please visit our website at https://www.ato.gov.au/Business/Non-commercial-losses/, or search quick code QC 33774 at www.ato.gov.au.

Relevant facts and circumstances: You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You commenced the animal breeding activity on a property with your spouse on XX February 20XX. The property you purchased was run-down, so you have invested a great deal in repairing infrastructure and improving pasture to increase stocking capacity. Planned pasture improvement will take approximately X years. You began the activity by purchasing a number of cattle in the 20XX-XX financial year, and now have approximately X number of animals and Y number of animals. You obtained a private ruling in 20XX where the Commissioner exercised his discretion in relation to your animal breeding business losses for the 20XX-XX and 20XX-XX financial years. The ruling was limited to that period as the business was projected to produce a profit in the 20XX-XX financial year. Although a profit was expected in the 20XX-XX financial year, due to the lead time for animal breeding being X to Y years, a loss was made. Your business will produce a profit of $X 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) and | Income Tax Assessment Act 1997 paragraph 35-55(1)(c).