Private ruling: Non commercial losses - special circumstances
Date of advice: 4 November 2021
Published: February 2022
Ruling period: Year ending 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-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 meeting one of the four tests. Consequently, the Commissioner will exercise his discretion in the 20XX-20XX financial year.

Relevant facts and circumstances: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a production and delivery business which is generally targeted towards celebratory events. You commenced business operations in the 20XX-20XX financial year with production starting several months later and expected to make a profit. Covid-19 impacted your business activity due to several state government mandated lockdowns and travel being restricted to 5 kilometres or less during the relevant affected periods of the financial year. Due to the restrictions your customers events were cancelled and subsequently orders for your product were cancelled. Your business was therefore unable to meet the assessable income test and suffered losses. You intend to make a profit and meet the assessable income requirement in the next 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)