Private ruling: Non-commercial losses - lead time
Date of advice: 28 October 2020
Published: December 2020
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 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)(b) of the Income Tax Assessment Act 1997 to allow you to include any losses from your farming business in the calculation of your taxable income for the 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 and your partner (You) satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the Income Tax Assessment Act 1997 . On 20XX you acquired a property with the intention of planting trees (trees). You engaged a consultant to inspect the property to provide advice on the establishment and ongoing operations of the plantation. The consultant provided you a detailed report. The consultant recommended you place your order for trees as soon as possible due to the strong demand for trees and warned that there could be a delay in delivery. Following shipping delays trees were delivered on 20XX and planting completed on 20XX. On 20XX you engaged a grower liaison officer to inspect the trees and provide advice. You expect to meet the assessable income test at year 6.

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)