Private ruling: Commissioner's discretion - special circumstances
Date of advice: 6 April 2023
Published: 29 May 2023
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 30 June 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 business activity in your calculation of taxable income for the 20XX 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 and that these prevented you from making a tax profit. Consequently, the Commissioner will exercise his discretion in the 20XX financial year.

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. In the 20XX financial year, you commenced your farm activity. It employs full-time and part -time staff. In the 20XX financial year, the activity failed to produce a tax profit due to a mice plague which compounded factors caused by the previous years of drought and COVID-19. The mouse plague started in the spring of 20XX, when the farmers were harvesting a bumper crop and ended around December 20XX. Your business was impacted in the following ways: • Crops were destroyed so that the diseases were not spread to livestock. • The mice damaged more than 10% of crops for the year which would have been ready for harvest before the end of the 20XX financial year. • Lost multiple livestock due to the mouse plague, occurred by poisoning the mice on the property. By using either anti-coagulants or zinc phosphide, the actual bait itself is a poisoning risk to livestock if present in the hay when it is feed to the livestock (see article "Mice Contaminated Hay - What's the Risk" 28 January 2021). • There was a large amount of damage to machinery and vehicles which needed to have wires repaired and parts replaced. Financial Statements indicate a profit for the year ended 30 June 20XX.

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)