Private ruling: Commissioner's discretion - non-commercial loss
Published: October 2014
Ruling period: Year ended 30 June 2015 to year ended 30 June 2041
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Commissioner exercise the discretion in section 35-55 of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your silviculture business activity in the calculation of your taxable income for the 2014-15 to 2040-41 financial years? | A1: Yes.

Relevant facts and circumstances: You have owned a large property (the property) for a number of years. The property was previously used for stock grazing. You engage the services of a qualified forestry and resource economics consultant to develop a business plan and provide recommendations for establishing the primary production plantation business from the property. You have determined the breeds of trees and ordered trees for the plantation, and are in the process of preparing the property for planting from the 20XX financial year. You intend to produce a variety of timber from the plantation, but X% of the total plantation will come from a small number of species. The business will produce assessable income periodically from the thinning process and the final harvest of the final crop trees. Over the life of the 25 year business plan you expect to make a net profit of $X. You have provided independent evidence that attests to a lead time of 25 years for your industry. Your income for non-commercial loss purposes is in excess of $250,000.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 35-1. | Income Tax Assessment Act 1997 - Subsection 35-10(2E). | Income Tax Assessment Act 1997 - Section 35-55

Reasons for decision: Summary: You have requested the Commissioner to exercise his 'lead time' discretion for the 2014-15 to 2040-41 financial years so that you are not required to defer any losses from your silviculture business activity under the non-commercial loss provisions. The 'lead time' discretion may be exercised for the income years in question where: • it is in the nature of your business activity that there will be a period before a tax profit can be produced; and • there is an objective expectation your business activity will produce a tax profit within the commercially viable period for your industry. Having regard to your full circumstances, it is accepted that any losses in the years in question will be the result of the nature of the business activity. 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 for the 2014-15 to 2040-41 financial years.