Private ruling: Commissioner's discretion for non-commercial business losses
Date of advice: 26 March 2021
Published: May 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion to allow you to include any losses from your business in the calculation of your taxable income for the 20XX-XX financial year? | 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 own a farm which is run by you and your spouse. Your income for non-commercial loss purposes was greater than $XXXX in the 20XX-XX financial year. Your property has been detrimentally affected by drought over the past number of years with the past number of years proving to be the worst in at least X years. You had an exponential increase in expense to try and feed livestock and to care for them. This resulted in an inability to make a tax profit in the 20XX-XX financial year. You were forced to sell nearly all of your livestock including your breeding stock which you had spent close to X years cultivating their genetics. Due to you consistently keeping up with weather forecasts, you were able to recognise that a La Nina weather event was approaching towards the end of the 20XX calendar year and accordingly, you purchased over $X in cattle before the end of the 20XX-XX financial year. This has proven to be an economically beneficial decision as rain which has since arrived, has caused a high demand for livestock and therefore increasing the price of cattle per head. Had it not been for the drought, you informed that you would have been able to generate sales in excess of $X for the 20XX-XX 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 section 35-55 | Income Tax Assessment Act 1997 paragraph 35-55(1)(a)