Private ruling: Non-commercial loss
Date of advice: 22 October 2025
Published: 8 December 2025
Ruling period: 1 July 20XX to 30 June 20XX | 1 July 20XX to 30 June 20XX | 1 July 20XX to 30 June 20XX | 1 July 20XX to 30 June 20XX | 1 July 20XX to 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 to allow you to include any losses from your primary production business in the calculation of your taxable income for the 20XX to the 20XX income years? | A1: Yes.

Relevant facts and circumstances: You commenced a primary production business on DD MM YYYY. You have established and prepared a property with adequate plant and equipment to effectively conduct the business. You employ a part-time manager as well as casual staff and contractors to perform repair and renovation works to existing infrastructure. In MM YYYY, initial stock was purchased for $XXX. Poor drought conditions throughout years 20XX and 20XX negatively impacted stock. The business activity requires a minimum time of 8-9 years using proven strategies to retain adequate stock. Under drought conditions, it will take an extra 2-3 years. However, depending on market and climatic conditions, this process can be accelerated with improved stock quality. You stated that in your industry and due to the drought conditions, 11 years is the accepted number of years before an activity becomes commercially viable. From 20XX to 20XX, stock numbers kept increasing. However, from 20XX to 20XX, unfavourable seasonal and market conditions caused stock numbers to decrease. In 20XX, you engaged consulting services. You obtained a consultation report on the commercial viability and production of the business activity. The consultation report provides an evaluation on the strategy, viability, profitability and challenges. Your business plan was reviewed, and it was concluded that the business is able to achieve profitability in a commercially viable time. You have prepared a Business Plan for the business (business plan). The decrease in stock is expected to pick up again in 20XX-20XX income years. As per your business plan, projected sales of stock will increase from XXX in 20XX -20XX to XXX in 20XX -20XX. Drought conditions have caused lead time to extend an extra 2-3 years, slowing down the business activity. Market and seasonal downturns because of the drought have also affected the business. Your first stock sales were in 20XX. These sales grossed $XXX. Stock sales continued to increase from 20XX to 20XX from $XXX to $XXX respectively. However, stock sales decreased in 20XX to $XXX. Stock prices are expected to increase in 20XX due to seasonal conditions and strong export demands. You have been able to retain your core stock through the harsh weather conditions which will aid in the business' profitability on the improving seasonal and market conditions. It is projected gross income for financial years 20XX to 20XX are to increase from $XXX to $XXX. Your business is expected to be profitable after the 20XX financial year. This is within industry standard whilst taking into account climate and market conditions. You sought the Commissioners discretion in the 20XX financial year based on lead time. Discretion was granted on DD MM YYYY and covered financial years from 20XX to 20XX. You also sought the Commissioners discretion in the 20XX financial year based on lead time. Discretion was granted on DD MM YYYY and covered financial years from 20XX to 20XX. Your income for non-commercial loss purposes in the 20XX income year (the income year prior to the income year this application was received by the Commissioner) is $XX0,000 or more.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 35 | Income Tax Assessment Act 1997 subsection 35-10(1) | Income Tax Assessment Act 1997 subparagraph 35-10(1)(a)(i) | Income Tax Assessment Act 1997 subparagraph 35-10(1)(a)(ii) | Income Tax Assessment Act 1997 subparagraph 35-10(1)(a)(iii) | Income Tax Assessment Act 1997 subparagraph 35-10(1)(a)(iv) | Income Tax Assessment Act 1997 subsection 35-10(2) | Income Tax Assessment Act 1997 subsection 35-10(2E) | Income Tax Assessment Act 1997 subsection 35-10(4) | Income Tax Assessment Act 1997 section 35-55 | Income Tax Assessment Act 1997 paragraph 35-55(1)(c)