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Edited version of private advice
Authorisation Number: 1051519670415
Date of advice: 20 May 2019
Ruling
Subject: Non-commercial losses and the Commissioner's discretion for lead time
Question
Will the Commissioner exercise the discretion to allow you to include any losses from your business in the calculation of your taxable income for the 20XX-XX to 20XX-XX financial years?
Answer
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
This ruling applies for the following periods:
Year ended 30 June 20XX to 30 June 20XX
The scheme commences on:
17 April 20XX
Relevant facts and circumstances
You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the Income Tax Assessment Act 1997.
You carry on a business activity of cattle breeding.
You commenced business operations on XX April 20XX.
The gestation period of cattle is 10 months. Once a calf is born is stays with its mother for at least another eight months. Once the weaner is 12 months old it can be considered for sale depending on its size, market and weather conditions.
The Commissioner accepts that the lead time for cattle breeding is two to three years. You have advised in your application that the lead time for your industry is three to five years. The Commissioner does not accept that five years is within the commercially viable period for your industry; however you have provided a projected profit and loss statement that shows that your business activity will meet the assessable income test in three years, being the 20XX-XX financial year.
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), and
Income Tax Assessment Act 1997 paragraph 35-55(1)(b).