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Edited version of private advice
Authorisation Number: 1052045196278
Date of advice: 13 October 2022
Ruling
Subject: Commissioner's discretion - non-commercial losses
Question
Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) 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 20XX-XX to 20XX-XX 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 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 satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.
You carry on a primary production XXX business. You commenced preparatory work on your land some time ago.
This included:
• ripping the land to loosen the earth to allow it to be ploughed
• ploughing the land to turnover the soil
• making row for the XXX trees to be planted in
• fertilising the soil
• installation and testing of the irrigation
Contractors with heavy machinery were brought in to perform the earthworks.
You planted the XXX trees in a one week period in the year ending 30 June 20XX.
XXX XXX trees were planted.
Costs involved included the initial purchase of the XXX trees themselves, as well as irrigation infrastructure to keep them watered. There will also be some ongoing expenditure on herbicides, pesticides and fertilizers, as well as machinery and fuel to apply these chemicals.
You will maintain the XXX trees and property.
The produce will be sold on the wholesale market.
It is expected that a per kilogram rate will be paid to a local existing XXX farmer to pick, pack and market the produce utilising existing packing facilities and associated infrastructure.
You have provided independent evidence that attests to a lead time of 5-8 years for your industry.
Your financial model shows that you will meet the assessable income test in the 20XX income year.
Your application indicates that you expect to meet the assessable income test in the 20XX income year.
Your application indicates that you expect to make a profit in the 20XX income 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)(b)