Edited version of private advice

Authorisation Number: 5010077087740

Date of advice: 12 August 2021

Ruling

Subject: Commissioner discretion - non-commercial losses

Question

Will the Commissioner exercise the discretion under section 35-55 of the Income Tax Assessment Act 1997 to allow you to include any losses from your primary production business activity - xxxx farming in the calculation of your taxable income for the 20XX-20XX financial years?

Answer

Yes

The Commissioner is satisfied that your activity is carried on as a business. Having regard to your full circumstances, it is accepted that 'because of its nature' the business activity has prevented one of the four tests being passed. It is also accepted that you will pass one of the four tests or make a tax profit within the commercially viable period for your industry.

The phrase 'because of its nature' refers to inherent characteristics of the type of business activity being conducted by the taxpayer, which are common to any business activity of that type. These inherent characteristics must be the reason why the activity is unable to satisfy any of the tests. The discretion is not intended to be available where the failure to satisfy one of the tests is for other reasons.

This ruling applies for the following:

XXXX to 30 June XXXX

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are carrying on a primary production business as a sole trader.

There was a XXXX year Commissioners Discretion previously granted see Private Ruling XXXX.

The cultivation model you have adopted is the XXXX; this technique may not yield results for XXXX years.

At present, none of the XXXX xxxx will have xxxx to support xxxx for several more years.

You have been affected by unforeseen weather conditions including drought.

Once sufficient xxxx is produced from the existing plantings you intend to expand the xxxx further, by adding further xxxx. Before that happens, however, the existing plantings must turn a profit.

You have a business plan.

Your activity is of sufficient scale to be able to produce a profit as set out in your business plan you have provided, showing potential production and income and expenses.

Your business does not satisfy the 'other assets test", however the business does have pre- additional and additional capital investment.

Your income for non-commercial loss purposes in the income year prior to the income year for this application was received by the Commissioner was less than $250,000.

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)(a)