Private ruling: Non-commercial losses - Commissioner's discretion - special circumstances
Published: June 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

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 2010-11 financial year? | A1: No.


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 paragraph 35-55(1)(a) | Income Tax Assessment Act 1997 subsection 35-10(2E)

Reasons for decision: Summary: For the 2009-10 financial year onwards there has been changes to the non-commercial losses legislation to limit the circumstances where business losses can be offset against other income. The introduction of the income requirement test means that individuals with a taxable income in excess of $250,000 for that year will not get access to the four tests. The losses will in effect be quarantined to that business activity unless the limited circumstances arise where the Commissioner's discretion can be obtained under section 35-55 of the ITAA 1997. You have requested the Commissioner's discretion on the basis that your business was affected by special circumstances in the 2010-11 financial year. The information that you have provided is about why you have not been able to meet the income requirement test and the cessation of the business activity, not about 'special circumstances' (in the terms of the non-commercial losses legislation) that affected your business. In the 2010-11 financial year, you exceeded the $250,000 limit. Your annual taxable income does not normally exceed $250,000. There is nothing in the legislation that allows an exemption or discretion from this test because of a one-off failure to meet the test. In terms of paragraph 35-55(1)(a) of the ITAA 1997, there are no 'special circumstances' (drought, fire, flood) outside of your control that affected your business activity in the 2010-11 financial year. There is no scope to allow the Commissioner's discretion under the special circumstances limb in section 35-55 of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: The taxpayer (now deceased) carried on a primary production business, including livestock (approximately X head of cattle). | He derived assessable income in excess of $20,000 from this activity in the year ended 30 June 2011 and had expenses in excess of the income after taking into account deferred losses from previous years. | All the cattle were sold before the taxpayer passed away. | The adjusted taxable income for non-commercial loss purposes was in excess of $250,000 in this year.