Private ruling: Non-commercial losses - special circumstances
Date of advice: 5 December 2022
Published: 30 January 2023
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 31 October 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 year ended 30 June 20XX? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner will exercise his discretion to allow you to include any losses from your business activity in the calculation of your taxable income for the year ended 30 June 20XX. It is accepted that there is a 'special circumstance' that prevented you from meeting the non-commercial losses test. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au.

Relevant facts and circumstances: You were a partner in a large primary production partnership. You acquired a 25% interest in The Partnership on 31 October 20XX following the death of a relative. You sold your interest in The Partnership on 31 March 20XX. The Partnership made a profit in the 20XX and 20XX income years. The Partnership made a loss in the 20XX, 20XX and 20XX income years. The farm was severely affected by long extended drought conditions during the financial years 20XX through to 20XX. You provided financial statements for The Partnership for the 20XX to 20XX income years showing that the partnership was profitable prior to the drought and the effects following the drought. The partnership will make a profit in the 20XX and 20XX income years due to favourable seasonal conditions and XXX and commodity prices. You provided financial statements for The Partnership dated 1 July 20XX to 17 April 20XX showing a profit. You did not satisfy the less than $250,000 income requirement as set out in subsection 35-10(2E) of the ITAA 1997.

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 subsection 35-55(1)(a)