Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 30 August 2019
Published: November 2019
Ruling period: Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the Commissioner exercise his discretion to allow you to include any losses from your primary production business in the calculation of your taxable income for the 2017-18 and 2018-19 financial 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 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 <$250,000 income requirement set out in subsection 35-10(2E) of the Income Tax Assessment Act 1997 (ITAA 1997). You are carrying on a business (the activity) which commenced in the 2015-16 financial year. When the business commenced you were focused on increasing production in a particular line, and this was at the expense of other production. This approach allowed you to reach the critical number in this production line to enable profit from the base expenditure. In the 2017-18 financial year, the number of a particular production line fell slightly short of the earlier projected number, whilst in the 2018-19 financial year, you slightly exceeded the earlier projected number. You have provided a profit and loss report and forecasts for the 2016-17 to 2020-21 financial years, along with a Business plan. You submit that you were affected by special circumstances (severe weather conditions) in the 2017-18 and 2018-19financial years, which prevented you from passing one of the four Non-commercial losses commerciality tests. You have submitted evidence from relevant state primary industry and federal Government weather authorities to substantiate your claim. You submit that the special circumstances (severe weather conditions) impacted on your business by severely restricting your ability to produce your particular product over the last 24 months. You intend to make over $20,000 in assessable income in the 2019-20 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)