Private ruling: Commissioner's discretion - non-commercial losses
Date of advice: 19 December 2022
Published: 20 February 2023
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 the calculation of your taxable income for the income year ended 30 June 20XX? | A1: Yes. Having regard to your full circumstances, it is accepted that your business activity was affected by special circumstances outside your control and these prevented you from meeting one of the four tests. Consequently, the Commissioner will exercise his discretion in the 20XX income year.

Relevant facts and circumstances: You commenced your professional arts business in 20XX financial year and made a tax profit in that year. You commenced your professional arts business in 20XX-XX financial year and made a tax profit in that year. In 20XX-XX financial year, you made $XXX in business income from your professional arts business. To earn income for the 20XX-XX financial year, you were engaged in disability support work as a contractor for four months. You made $XXX,XXX in business income from your disability support work. You made a tax loss of $X,XXX from your professional arts business for 20XX-XX financial year. You had an assessable income of $XXX,XXX for 20XX-XX financial year. You did not satisfy the under $40,000 assessable income from other sources that do not relate to your professional arts business, set out in subsection 35-10(4) of the ITAA 1997 You satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the Income Tax Assessment Act 1997 (ITAA 1997). You did not satisfy one of the four tests set out in sub-paragraph 35-55(1)(b)(1) of the ITAA 1997. Due to the X government lockdown and other restrictions you were not able to carry on your business. Also, you state you could not carry on your business activity outside of Australia because of the Australian government international travel restrictions. You were unable to operate your professional arts business under the normal trading conditions due to COVID-19 government-imposed restrictions during the 20XX-XX income year. The COVID-19 government restrictions were out of your control and you were not able to carry of your business.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 35-10 | Income Tax Assessment Act 1997 Section 35-30 | Income Tax Assessment Act 1997 Section 35-55