Private ruling: Non- commercial losses - Lead time
Date of advice: 23 May 2022
Published: August 2022
Ruling period: 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)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your business activity in your calculation of taxable income in the 20XX and 20XX financial years? | A1: Yes Having regard to your full circumstances, it is accepted that it is the nature of the business activity that has prevented one of the four tests being passed. It is also accepted that you will pass one of the four tests or make a tax profit within the commercially viable period for your industry. Consequently, the Commissioner will exercise his discretion in the 20XX and 20XX financial years.

Relevant facts and circumstances: You are a partner in a partnership which carries on a primary production business. You commenced business operations in the 20XX financial year. The business has incurred loss in the 20XX financial year and expected to incur loss in the 20XX financial year. You initially planted several acres in which is expected to be harvested in the 20XX financial year. More acres were later planted, which got frosted and since have had to be replanted and is expected to be harvested in the 20XX financial year. Expenses to date include costs of development, capital infrastructure, planting, with further costs expected for training and maintenance until it is ready to be harvested. You have provided independent evidence that attests to a lead time of two to three years for your industry. You satisfy the income requirement set out in subsection 35-10(2E) of the ITAA 1997. You intend to meet the assessable income from your primary production business in the 20XX 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)(b)