Private ruling: Non-commercial losses - Commissioner's discretion - lead time
Date of advice: 10 March 2023
Published: 24 April 2023
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | 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 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 business activity in the calculation of your taxable income for the relevant income years? | A1: Yes. The Commissioner is satisfied that your activity is carried on as a business. Having regard to your full circumstances, it is accepted that 'because of its nature' the business activity has not made a tax profit or passed on of the four tests. 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.

Relevant facts and circumstances: You are a sole trader. You did not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You purchased this property which has acreage and a residential home including an old shed. You commenced a primary production activity. You are funding this activity with your own salary, savings, and the proceeds from the sale of investments. You have prepared the land for the primary production activity to ensure the activity can be carried on efficiently. You plan to continue to improve your property by installing more infrastructure to assist in the activity and purchase a more suitable transport vehicle. You attend meetings with industry professionals to continue to develop your knowledge. You have provided an information guide which indicates a recommended lead time for the activity to become profitable. You have calculated this based on a certain activity size. Currently your activity has exceeded this size. You expect the primary production activity to report a profit in the 20XX income 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)(a)