Private ruling: Commissioner discretion - non-commercial loss
Date of advice: 31 May 2022
Published: September 2022
Ruling period: 1 July 20XX to 30 June 20XX | 1 July 20XX to 30 June 20XX
Date scheme commenced: During the 20XX year

Ruling: Q1: Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA1997) to allow you to include any losses from your business activity in your calculation of taxable income for the 20XX and 20XX financial years? | 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 and 20XX financial years.

Relevant facts and circumstances: Your income for non-commercial loss purposes is less than $250,000. You retired in 20XX. Since this time, you have embarked on becoming a Tax Agent through the Tax Practitioner Board, getting experience, undertaking qualifications and undertaking supervised tax work. You have tax qualifications. Market research to support the start-up of the business was sourced by working in and observing other tax preparation businesses, as well as speaking to colleagues who have started their own businesses in the industry. You registered a business name. You have received Tax Agent registration through the Tax Practitioner's Board. During the 20XX income year, you commenced your first tax season as a sole trader. This led to you commencing your first tax season as a partnership in 20XX year. In 20XX income year, you had the first paying client on the books. You have a business plan which aims to expand the business in the future. You provide a range of taxation services for your clients. During 20XX year, you were searching for a business premises. On the 31 March 2020, the first pandemic stay at home order was issued by the government. The COVID-19 lockdowns that followed in 2020, meant the plan for physical premises was shelved. The ongoing lockdowns and pandemic uncertainty that continued throughout 2021, meant the plans for a physical shop front were abandoned. This resulted in business operations for the 2020 and 2021 financial years being negatively affected. You were not able to expand your new business to operating from a physical premises, given the lockdowns and lack of foot traffic. This led to a smaller growth of clients than had been planned. You adopted an online model. You undertook strategies to increase client intake during and following the removal of COVID restrictions. A newsletter copy was provided showing a marketing strategy during 20XX year. You expect to make a tax profit 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) | Income Tax Assessment Act 1997 subsection 35-30 | Income Tax Assessment Act 1997 paragraph 35-55(1)(b)