Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 5 September 2019
Published: November 2019
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

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 for the 20XX-XX and 20XX-XX financial years? | 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: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the Income Tax Assessment Act 1997 . As a partnership, you carry on a primary production business (growing activity) which commenced during the 20XX-XX financial year. You obtained a business loan from a financial institution to fund the initial planting, and part of the loan was also used to fund the initial set up costs. You also contributed an amount of your own funds towards the initial set up costs. You are leasing a block of land where the business activity is being conducted. You incurred the cost of clearing the leased land, and some of the initial set up costs before the initial planting could take place. The accepted lead time for your industry is 5 years. The first harvest will commence towards the end of the 20XX-XX financial year, over a three month period (in accordance with professional advice you have received from experts within your industry). As such you do not expect to make over $XX in assessable income in the 20XX-XX financial year. You intend to make $XX in assessable income in the 20XX-XX financial year. Once the business makes a profit, you intend on further growing the business by increasing the area under plant.

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)