Private ruling: Non-commercial losses
Date of advice: 23 October 2021
Published: January 2022
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 and that these prevented you meeting one of the four tests. Consequently, the Commissioner will exercise his discretion in the 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 business of handyman services for real estate agents. You commenced business operations in the 20XX financial year. In the 20XX financial year the COVID-19 pandemic and bad debtors impacted your business activity. Your business was impacted in the following ways: • The COVID-19 pandemic brought about a downturn in trade and the economy, affecting many businesses. • You experienced a bad debtor who did not pay the majority of an invoice. Your business has previously met the assessable income test. You intend to make a profit/make $20,000 in assessable income 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 paragraph 35-55(1)(a)