Private ruling: Non-commercial losses
Date of advice: 15 September 2022
Published: December 2022
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 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)(c) 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 for the years ending 30 June 20XX to 30 June 20XX? | A1: Yes Having regard to your full circumstances, it is accepted that it is 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 years ending 30 June 20XX to 30 June 20XX.

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 carry on a primary production avocado orchard business. The business is operated in a partnership. You commenced business operations in the year ended 30 June 20XX. Avocado trees were planted in the 20XX, 20XX and 20XX financial years. Additional plantings are planned for 20XX. The business currently employs four staff but has employed many staff during the planting stages and will employ many more when the avocados are ready to pick. The business intends to sell trays of avocados it produces to wholesalers. Avocado trees take time to grow in size and mature, before crops can be set, held and harvested from the tree. You have provided independent evidence in the form of a document titled: Avocado culture in Western Australia , by Alec McCarthy, on behalf of the Department of Agriculture, that attests to a commercially viable period of 6-7 years for your industry. Avocado trees should start to yield small crops in year 3 and increase to near full production by year 7. You intend to make a tax profit in the year ending 30 June 20XX.

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)