Disclaimer
This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au

This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private ruling

Authorisation Number: 1011586220656

Ruling

Subject: Non commercial losses - Commissioner's discretion

Question

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 2009-10 income year?

Answer: Yes.

This ruling applies for the following period:

1 July 2009 to 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You purchased and commenced a primary production business in September 2009.

You have substantial capital investment in the business property.

You have projected a loss for the 2010-11 income year and net income increasing over the next three years.

Your income for non commercial loss purposes for the 2009-10 income year was more than $250,000 and you expect it to be less than this in the 2010-11 income year.

Your business activity will become commercially viable in two years.

The independent evidence you provided suggests that the commercially viable period for your industry is two years.

Reasons for decision

Section 35-1 of the ITAA 1997 provides that an income requirement must be met (along with certain other tests), in order to include losses from a business activity in your taxable income calculation. The income requirement is set out in subsection 35-10(2E) of the ITAA 1997. If the income requirement is not met, the Commissioner may exercise discretion to allow the inclusion of the losses.

In order to exercise the discretion, the Commissioner must be satisfied, based on evidence from independent sources, that your business activity will produce assessable income greater than the deductions attributable to it for that year, within a commercially viable period (paragraph 35-55(1)(c) of the ITAA 1997).

In your case, you do not meet the income requirement as your income for non commercial loss purposes is above $250,000. However, you have supplied evidence from an independent source which has established that your business activity will produce assessable income greater than the deductions attributable to it for that year, within a period that is commercially viable for this industry.

Therefore, the Commissioner will exercise the discretion available under paragraph 35-55(1)(c) of the ITAA 1997 and allow the losses from your business activity to be included in the calculation of your taxable income.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).