Private ruling: Non-commercial losses
Date of advice: 4 December 2019
Published: February 2020
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

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 20XX-XX 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 in the 20XX-XX financial year. For more information on non-commercial losses, please visit our website ato.gov.au and search for quick code QC 33774.

Relevant facts and circumstances: Your income for non-commercial loss purposes is more than $XYZ. You carry on a primary production business. The business activity commenced in XXX XXXX. You applied for lead time for the 20XX-XX financial year due to the nature of your activity, with the expectation that you would make a profit in the 20XX-XX financial year. During the 20XX-XX financial year the farm received a significantly lower than average rainfall amount and was affected by the worsened drought conditions. As a result you have incurred more expenditure on water and fodder. It has also affected the capacity and ability to generate income from the sale of the cattle. As result of the drought the business activity made a loss in the 20XX-XX financial year. The rainfall has since improved and the business stock has increased over the past 12 months. You have provided a profit and loss statement which shows that but for the special circumstances, the business would have made a profit. You have also provided a profit and loss statement to show that with the recent increased rainfall, the business will be profitable in the 20XX-XX 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)