Private ruling: Non-commercial losses - special circumstances
Date of advice: 27 June 2024
Published: 5 August 2024
Ruling period: Year ended 30 June 2023
Date scheme commenced: 1 July 2022

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 to allow you to include any losses from your business activity in the calculation of your taxable income.

Relevant facts and circumstances: You satisfy the income requirement in subsection 35-10(2E) of the ITAA 1997. You are a sole trader as a special professional in the music industry. You receive royalties from copyright management associations for the use of your works. During 2022-23, the entity that gathers the data for the use of your works encountered issues with the data exchange and you were not paid correctly during that year. As a result, you were unable to meet the assessable income test. You received the payment in the next financial year. You have met the assessable income test in previous years and will met the assessable income test for 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)