Private ruling: Commissioner's discretion - losses from business activity
Date of advice: 21 March 2024
Published: 29 April 2024
Ruling period: Year ended 30 June 2023
Date scheme commenced: 1 July 2019

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 2022-23 financial year? | 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 these prevented you from meeting one of the four tests. Consequently, the Commissioner will exercise his discretion in the 2022-23 financial year.

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 carry on a travel business selling both domestic and international travel products. You have a Business Plan. You work from your home office and from your laptop when you are away from your home office. Your products or services are advertised through word of mouth, website, emails to your clients and social media platforms. Your client base has nearly doubled since commencement. You spend a number of hours on business activity each week, depending on client bookings, marketing efforts and self-education activities building product knowledge and industry developments-especially post-COVID 19. Your other employment hours fluctuate each week. COVID-19 lockdowns and travel restrictions impacted your business activity in the following ways: • COVID-19 lockdowns and travel restrictions came into effect around the world and no travel bookings occurred during this period • existing bookings were cancelled • unpaid work occurred processing cancellations and refunds • reduced number of bookings as restrictions eased. JobKeeper payments allowed your business to continue through COVID-19 lockdown and government restriction periods. After the JobKeeper program concluded, you sought alternative employment. You continued in this role, while keeping your business afloat, until the tourism industry regained stability once more. You plan to reduce your hours working as an employee as the business builds after COVID-19. You will meet the $20,000 assessable income test in the 2023-24 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)