Private ruling: Non-commercial losses - lead time - less than $250k
Date of advice: 28 July 2020
Published: August 2020
Ruling period: Year ended 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Will the Commissioner exercise his discretion to allow you to include any losses from your primary production business in the calculation of your taxable income? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner has granted his discretion. It is accepted there is a 'lead time' in the nature of your business activity and you will pass a test or make a tax profit within your industry's commercially viable period. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au

Relevant facts and circumstances: Your income for non-commercial loss purposes is less than $250,000 You carry on a primary production business. The business will operate by purchasing, raising and milking livestock to provide a range of products. Due to the breeding cycle for the livestock there will be a delay in being able to produce the products. You have constructed the necessary equipment on the property to allow you to manufacture your products. However you are required to submit an application to have the premises licenced, which can take a few months to receive the licence. From research you have conducted and communicating with similar business owners it was concluded that the reasonable lead time for a business in this industry is around one to two years. Due to the delays outside of your control, the business activity was not able to produce any income and as a result produced a taxable loss for the 20XX-XX financial year. You have provided a projected profit and loss statement which states that the business activity will not only meet a test but produce 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)