Private ruling: The Commissioner's discretion for non-commercial losses
Date of advice: 25 October 2017
Published: March 2018
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 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. 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 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 business in partnership with your spouse. You commenced business operations in the 20XX financial year. You submit that you were affected by special circumstances in the 20XX financial year. You have submitted the following evidence to substantiate your claim: ● Relevant Government drought assessment information You submit that the special circumstances impacted on the profitability of your business in the following ways: ● There was a reduction in sales volumes due to a decrease in price per head of cattle; ● Additional land had to be purchased in X to move cattle onto to reduce the wear on the main property; ● You were required to pay agistment costs for cattle at several other properties; ● You were required to purchase additional fodder to supplement the feed available on the land; ● On top of the drought conditions you are currently experiencing, your region was directly impacted by a severe weather event in 20XX. You are still recovering from the damages caused by the severe weather event and you have had to outlay additional funds to repair the damages caused by it. You have provided a projected profit and loss statement that suggests that had the special circumstances not occurred, the business would have produced a tax profit of $XXXX in the 20XX 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) and | Income Tax Assessment Act 1997 paragraph 35-55(1)(a).


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