Private ruling: Non-commercial losses - Commissioner's discretion
Date of advice: 22 June 2020
Published: August 2020
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion to allow you to include any losses from your primary production activity in your calculation of taxable income? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner has granted his discretion. It is accepted that your business activity was affected by special circumstances outside your control which prevented you from passing a test. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au

Relevant facts and circumstances: You satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You are carrying on a primary production business. You grow your own feed for your livestock as well as purchasing feed to supplement your supply. During the 20XX-XX financial year the business was affected by drought conditions which has impacted the availability of feed and has reduced your capacity to produce income. In a normal season you would normally produce around XX%-XX% of feed, however the effects of the drought meant you did not bail any hay that year. As no feed was available it was necessary for you to purchase substantial amounts of fodder. The sale of livestock was also affected due to impacts caused by the drought. You have provided a projected profit and loss statement which indicates that the business will not meet the assessable income test and will result in an overall net loss for the 20XX-XX financial year. You submit that the business activity will meet the assessable income test in the 20XX-XX 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)