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Edited version of private advice
Authorisation Number: 1052270875655
Date of advice: 25 September 2024
Ruling
Subject: Non-commercial losses lead time
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 2022-23 financial year?
Answer
Yes
Having regard to your full circumstances, it is accepted that "because of its nature" your business activity has not or will not satisfy meeting one of the four tests but will do so in a commercially viable time. Consequently, the Commissioner will exercise his discretion in the 2022-23 financial year to allow you to include any losses from your business activity in the calculation of your taxable income.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 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 are in the business of earthmoving services and equipment hire.
You started the business in 2022.
Your plan was to service private landholders on small to medium properties, providing earthmoving services and equipment hire.
You were a full-time employee prior to starting the business, however you took a redundancy which has allowed you to pursue the business.
You have purchased a Bobcat and excavator but have not used these items until the start of the business.
To provide a variety of services you have purchased a truck with a tipper modification and a tandem trailer to transport the Bobcat and excavator.
You have found that there is high demand for your equipment and earthworks services. While there is demand the industry also has a lead time of around a year due to machinery cost and weather causing progress delays.
Currently you mainly hire out the equipment with yourself as the sole operator.
You have passed the assessable income test in the 2023-24 financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 35-10(1)(b)
Income Tax Assessment Act 1997 subsection 35-10(2)
Income Tax Assessment Act 1997 paragraph 35-55(1)(c)