Private ruling: Non-commercial losses - lead time
Date of advice: 17 July 2025
Published: 15 September 2025
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

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 primary production activity in your calculation of taxable income for the 20YY-YY to 20YY-YY income years? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner will exercise their discretion to allow you to include any losses from your primary production activity in the calculation of your taxable income for the 20YY-YY to 20YY-YY income years. It is accepted that there is a 'lead time' inherent to the nature of your activity and you will make a tax profit within the commercially viable period for the industry concerned.

Relevant facts and circumstances: You do not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a primary production business in a partnership. You decided to commence the business as the owners of the property, your family members, were no longer able to maintain the property. You and your partner entered a lease for the land in 20YY. You have knowledge and expertise of stock breeding and large-scale farm management. You have purchased additional land in the same region. In your first year in business, you purchased a herd of livestock. To ensure that the livestock were successful in reproducing the livestock were tested and confirmed pregnant and a number were purchased with an offspring at foot. You purchased male livestock for breeding to ensure quality genetics and set the breeding program up for success. In the 20YY-YY income year you purchased 2 additional male livestock to account for age and eventual death. All female livestock that are available have been bred each year and that any female livestock that do not produce will be sold. It takes a female two years to reach maturity for breeding purposes. To generate income within the first few years most of the offspring were sold at a younger age, and lower weight. Within the most recent year you have been able to retain more of the male offspring, you plan to hold these offspring until they reach a higher weight which will increase their overall value. You have also been able to retain more of your female offspring as it is your aim to become self-replacing the no producing/older livestock with your own for breeding. Your projected figures for the next two income years show you would be able to maintain a sufficient birth rate and will achieve a net profit in the 20YY-YY income year which is within the commercially viable period for your industry.

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)