Private ruling: Non-commercial losses.
Date of advice: 14 September 2018
Published: November 2018
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion in subparagraph 35-55(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include losses from your business activity of primary production in the calculation of your taxable income for income years of the ruling? | 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 for the income years of the ruling.

Relevant facts and circumstances: You have acquired an X hectare block of vacant land with the intention of re-establishing it as a working farm. The land adjoins your relatives’ farm. Their farm currently produces approximately X tonnes of produce per hectare. The current price of the produce is approximately $X per tonne. Your land, when fully productive, should produce an income of over $X per annum. A crop is planted in Y. However, the land has to be prepared (cleared, cultivated and worked) in the months prior to planting. The crop is harvested approximately 12 months after planting. You have planted a crop on your land. This crop will be harvested in the 20XX income year. You have harvested some ‘stand over’ crop which was already planted when you purchased the land. You are expecting a small income from this crop in the 20XX income year You expect a moderate income in the 20XX income year from the crop you have planted. Full production will occur in the 20XX year. You expect to make a tax profit in the 20XX financial year. The proceeds at the crop are not paid until the crop is delivered to the mill. Your intention is that losses, if any, will be claimed against your salary/wage income. Your 20XX-XX income tax return will shows income from employment of $X and expenses of $X in earning this income. It is anticipated that the farming activities will show an income of $X for the 20XX-XX year with costs of about $X. You do not satisfy the income requirement set out in subsection 35-10(2E) ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 35-55