Edited version of private advice

Authorisation Number: 1052014260310

Date of advice: 8 August 2022

Ruling

Subject: Commissioner's discretion - non-commercial losses - lead time

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 business activity in your calculation of taxable income for the 2020-21 to 2032-33 financial years?

Answer

Yes.

Having regard to your full circumstances, it is accepted that it is 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 in the years ending 30 June 20XX to 30 June 20XX.

This ruling applies for the following periods:

Year ended 30 June 20XX

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

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 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 July 20XX

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 XXXX business.

The business is operated directly by yourself and contracts with company A to provide XXXX services.

You commenced business operations in the year ended 30 June 20XX.

You are growing XXXX XXXX XXXX, which were planted over a three month period in the year ended 30 June 20XX.

You have overseen the soil testing and preparation, and XXXX design.

Between commencing business and beginning planting, you worked to prepare the property for planting. The preparations involved soil testing, soil pH correction (lime application), spreading compost and fertiliser, planting a green manure crop over winter 20XX to build up organic matter, dam building, deep ripping of the XXXX rows, XXXX installation and irrigation installation.

The XXXX XXXX planting has been completed and there are no additional stages planned. Your XXXX hectares of planted XXXX is significant in the context of the nearby commercial XXXX.

The XXXX 20XX Australian Competition & Consumer Commission, XXXX XXXX market study (Final Report) provided that it can take up to XX years for XXXX to reach peak quality for some premium varieties.

The XXXX XXXX XXXX have been planted with an expectation that they are to be processed and sold in bottles. You will not be involved in the processing of the XXXX.

You have planted a XXXX with a view to growing XXXX for supply to well-regarded third-party XXXX.

The first year of commercial production will be the year ending 30 June 20XX, when the XXXX reach sufficient maturing to produce quality fruit. Harvest in your locality usually occurs in late April of each year. Your current plan is to sell the XXXX at harvest.

You have provided independent evidence that attests to a commercially viable period of XX years for your industry.

You intend to make a tax profit in the year ending 30 June 20XX.

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)