Private ruling: Non-commercial losses and Commissioner's discretion for special circumstances
Date of advice: 14 August 2017
Published: November 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

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 primary production business activity in your calculation of taxable income for the 2015-16 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. It is also accepted that, but for the special circumstances, you would have made a tax profit, and you have met, or would have met one of the four tests. Consequently the Commissioner will exercise his discretion in the 2015-16 to 2018-19 financial years. For more information on non-commercial losses, please visit our website ato.gov.au and enter quick code QC 33774 into the search bar at the top right of the page.

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 business in a partnership. The business is primarily concerned with stock farming. You commenced business operations in the 20XX-XX financial year. You submit that you were affected by special circumstances in the 2015-16 financial year. You submit that the special circumstances, being drought, impacted on the profitability of your business in the following ways: ● you were forced to sell livestock and you were unable to stock the property to its full capacity ● there were unforeseen expenses of fodder and water due to the lack of rainfall and paddock feed available ● the stock were moved to another site in order to keep them alive. As a result of this there were additional agistment expenses In mid 201X you received a large carbon credit payment. In mid 201Y, when your area received the rainfall it needed, you used the money received from the carbon credit to purchase an additional XXX head of breeding stock. It is expected that these breeding stock will generate an extra $125,000 in income from the progeny. It is anticipated that you will generate another $200,000 in profit from on-selling the fatten breeders. You have provided a projected profit and loss statement that suggest that had the special circumstances not occurred in the 2015-16 financial year, the business would have produced an estimated profit of $XX,XXX.

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) and | Income Tax Assessment Act 1997 paragraph 35-55(1)(a).