Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 28 July 2020
Published: February 2022
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 August 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-XXand 20XX-XX 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 this has prevented you meeting one of the four tests. It is also accepted that, but for the special circumstances, you would have met one of the four tests. Consequently the Commissioner will exercise his discretion for the 20XX-XXand 20XX-XX financial years.

Relevant facts and circumstances: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. In mid-20XX you commenced carrying on a business. Your business made a small loss in the 20XX-XX financial year which was deferred. Your business then made a profit in the 20XX-XX financial year. Following this your business made losses in the 20XX-XX and 20XX-XX financial years. You submit that you were affected by special circumstances in the 20XX-XX and 20XX-XXfinancial years. You have submitted the following evidence to substantiate your claim: • A letter dated in early 20XX from a specialist medical practitioner confirming that following an examination your symptoms met the criteria for a specific chronic and debilitating condition. • You submit that the special circumstances impacted on your business in the following ways: • You were diagnosed with a chronic condition which can cause several debilitating symptoms such as pain, extreme fatigue, poor sleep, and problems with concentration and memory, along with a separate chronic condition. • As a result your health has substantially deteriorated since the business commenced. • These conditions first started having a significant impact on your business from the start of the 20XX-XX financial year and throughout the 20XX-XX financial year, as evidenced by the reduction in turnover. • Due to the direct impact of these health conditions that you have suffered from, you were unable to make $XXX in business income for the 20XX-XX and 20XX-XX financial years, and this was despite your best attempts in keeping the business operating during these financial years. • As such you had to rely on savings and superannuation drawings to make ends meet in those financial years. Due to the impact of COVID-19 it is now unclear as to whether you will be able to continue operating your business, given the potential risk to your health (given your personal circumstances).

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)