Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 14 February 2020
Published: March 2020
Ruling period: Year ended 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the Commissioner exercise the discretion to allow you to include any losses from your [XXXX] business in the calculation of your taxable income for the [20YY-YY] financial [year/years]? | 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 caused you to make a loss. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au

Relevant facts and circumstances: You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a mixed primary production business of Livestock farming and grain growing which commenced several years ago. You submit that you were affected by special circumstances in the 2018-19 financial year. You have submitted the following evidence to substantiate your claim: · A special weather report from an Australian Government authority confirming that the area where you conducted your business activity has suffered the effects of severe weather conditions from early in 2017 to late 2019. · Financial reports for the 2017-18 and 2018-19 financial years for your business. · Projected income and expenditure from late 2019 to late 2021. · Livestock schedule for the 2017-18 and 2018-19 financial years. You submit that the special circumstances impacted on the profitability of your business in the following ways: · You incurred significant increased expenditure in the 2018-19 financial year which was directly attributable to the severe weather conditions. · There were livestock deaths which were directly attributable to the severe weather conditions. · The livestock you sold in the 2018-19 financial year were sold at a reduced price per head due to the effects of the severe weather conditions. According to the supplied livestock schedule, in comparison to the sale price per head you obtained for the livestock in the 2017-18 financial year, this equates to a significant monetary difference / shortfall. · Collectively all of these factors which were directly attributable to the severe weather conditions equate to more than the actual net partnership loss in the 2018-19 financial year. Due to the abovementioned impacts the severe weather conditions have had had on your business along with the ongoing effects of the severe weather conditions which have not yet subsided, you do not project a return to profit until the 2021-22 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)