Edited version of private advice

Authorisation Number: 1051890887525

Date of advice: 27 August 2021

Ruling

Subject: Commissioner's discretion - 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 XXX business activity in the calculation of your taxable income for the 20XX-XX to 20XX-XX income 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 make a tax profit within the commercially viable period for your industry. 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

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 XXX 20XX

Relevant facts and circumstances

You do not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.

You commenced a primary production business as a sold trader during the 20XX-XX income year. The business consists of XXXX and XXXX production.

You are the registered proprietor of XXX parcels of land situated in XXXX.

From late 20XX, you sought advice, conducted research, and considered the development of an XXX primary production. You became a member of XXXX Australia in XXX 20XX.

In XXX 20XX, you engaged a consulting firm to undertake a feasibility study for XXX primary production. In March 20XX, you made a final decision to proceed with your proposed business.

Your business plan involves two phases:

•         Phase 1: construction of the irrigation infrastructure and planting an XXX area in the period from XXX to XXX 20XX.

•         Phase 2: preparation and planting of the balance.

The plan is to plant approximately X Ha in the Spring of 20XX and approximately X Ha in the Spring of 20XX. The limitation on planting more than X Ha in the Spring 20XX is the availability of suitable seedlings.

On X XX 20XX, you registered business name for your primary production business.

Between XX and XX 20XX, you engaged various contractors for the following:

•         To carry out mounding to prepare the primary production area for planting.

•         To construct a bore for the purpose of irrigating the primary production and supplying stock-water.

•         To install the irrigation system.

•         To upgrade the electrical supply system.

In XX 20XX, you ordered the first consignment of seedlings for planting in Spring 20XX. You paid $XXX on XX 20XX to secure delivery of those plants. The seedlings (of XXX) will be delivered and planted in the Spring of 20XX.

By XX 20XX, you have ordered additional plants for delivery in the amount of $XXX.

You expect the primary production will produce a tax profit in year X (i.e. in the 20XX-XX financial year) which is consistent with a period that is commercially viable for the industry.

Your primary production business also includes XXXX production as complementary to the horticultural use of the land.

On X XX 20XX, you purchased XXX animals. The XXXX animals XXXX during XX 20XX. You expect the XXXX component of the primary production business to generate a tax profit from the 20XX-XX financial year.

From X XX to 30 June 20XX, you worked approximately XX days on your farm. You also spent, on average, about XX hours a month undertaking administrative, management and business development tasks relating to the primary production business. Your intention is to increase the time engaged in the primary production business progressively over the next X to XX years.

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)