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Edited version of private advice
Authorisation Number: 1052405752090
Date of advice: 06 June 2025
Ruling
Subject: Commissioner's discretion - non-commercial losses
Question 1
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?
Answer 1
Yes.
This ruling applies for the following periods:
1 July 20YY to 30 June 20YY
1 July 20YYto 30 June 20YY
1 July 20YY to 30 June 20YY
1 July 20YY to 30 June 20YY
1 July 20YY to 30 June 20YY
The scheme commenced on:
X February 20YY
Relevant facts and circumstances
1. You commenced a primary production business during the 20XX income year.
2. You are a sole trader.
3. You established the business activity on a property you purchased in 20XX.
4. ABC Pty Ltd (ABC) became the owner of the land from 20XX. You are a director of ABC.
5. The business activity will produce a product in commercial quantity.
6. You have cleared and prepared an appropriate site on the property.
7. The nature of the business activity means that a number of years will pass between commencing the business activity and producing the product.
8. You have produced evidence from independent sources supporting that in your industry, 5 to 7 years is the accepted number of years before an activity becomes commercially viable.
9. In the 20XX financial year, the initial preparation was conducted.
10. In the 20XX financial year, greater expenditure was and will be involved in progressing the creation of the farm.
11. You have prepared a Business Plan for the business.
12. You plan on hiring an employee to assist in the farm.
13. The financial projection in the business plan forecasts that the product will first produce in 20XX, which is year 5 of the business. The estimated sales for 20XX will producing a loss.
14. Production in subsequent years is expected to increase substantially, with only a relatively minor increase in outgoings, resulting in substantial profits from 20XX to 20XX.
15. It is expected that the business will first make a profit in 20XX.
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)
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