Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 17 December 2019
Published: February 2020
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your primary production business in the calculation of your taxable income for the 2018-19 financial year? | A1: Yes. Having regard to your full circumstances, it is accepted that your business activity was affected by special circumstances outside your control. It is also accepted that, but for the special circumstances, you would have made a tax profit, and you have met, or would have met one of the four tests. Consequently the Commissioner will exercise his discretion for the 2018-19 financial year.

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 business which commenced a number of years ago. You submit that you were affected by special circumstances (severe weather conditions) in the 2018-19 financial year. You have submitted the following evidence to substantiate your claim: · A report from an Australian Government authority confirming that the area where you conduct your business activity has been affected by the severe weather conditions for a couple of years. · You submit that the special circumstances impacted on the profitability of your business in the following ways: · The severe weather conditions first started having an effect on your business in the 2017 calendar year, and continued to have an effect to the point where you did not have any livestock that were in a fit condition to sell during the 2018-19 financial year. · You did make attempts to mitigate the situation by way of feeding your livestock alternate feed, however this approach did not work out due to the low quality of the alternate feed (as a result of the severe weather conditions). · In summary, had it not been for the severe weather conditions you would have returned a net profit for your primary production business. You intend to return to profit in the 2019-20 financial 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)(a)