| Disclaimer This edited version has been archived due to the length of time since original publication.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 advice
Authorisation Number: 1051681688941
Date of advice: 22 May 2020
Ruling
Subject: Commissioners discretion on non-commercial losses
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 productionbusiness activity in your calculation of taxable income for the 2018-19 to 2020-21 financial years?
Answer
Yes.
Having regard to your full circumstances, it is accepted that it is in the nature of the business activity that has prevented you making a tax profit. 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 2018-19 to 2020-21 financial years.
For more information on non-commercial losses, please visit www.ato.gov.au and search quick code QC 33774.
This ruling applies for the following periods:
Year ended 30 June 2019
Year ending 30 June 2020
Year ending 30 June 2021
The scheme commenced on:
1 July 2018
Relevant facts and circumstances
You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.
You carry on a primary production business which commenced early in the 2016-17 financial year.
Your business made a tax loss in the 2016-17 and 2017-18 financial years, which have been deferred, due to your business failing to meet any of the four commerciality tests (you satisfied the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997 in each of those financial years).
You initially started on a small scale in the 2016-17 financial year.
You expanded the business in the 2018-19 financial year, where you commenced leasing another property.
You project to expand your business further by the end of the 2019-20 financial year.
You project to expand your business even further by the end of the 2020-21 financial year, and to then grow on a consistent basis each year.
You have provided independent evidence, a letter from an Australian expert within your industry that attests to a commercially viable period of close to 10 years for your industry, to reach what is considered as being a commercial level.
The letter also outlines the following challenges currently faced by your industry:
- There is presently a huge shortage of stock across Australia.
- It can take quite a few years for a new operator to get to a commercial level.
- Recent droughts and bushfires throughout Australia have had a huge effect on the industry.
You have also supplied a document produced by an Australian Government Department, which also confirms that your industry was facing similar challenges to those outlined by the industry expert in their supplied letter during the 2014-15 financial year.
You project you will make a tax profit in the 2021-22financial 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)
Income Tax Assessment Act 1997 paragraph 35-55(1)(c)