Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 28 November 2019
Published: February 2020
Ruling period: Year ended 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2018

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 productionbusiness activity in your calculation of taxable income for the 2018-19and 2019-20 financial years? | 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 satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a primary production business activity which commenced in late 201X. You also commenced another primary production business activity in late 201Y, which you have grouped together with your original primary production business activity for the purposes of the non-commercial loss provisions, as the two activities are related. The newer primary production business activity will be supplemented with your continued original primary production business activity. You submit that you were affected by special circumstances (severe weather conditions) in the 2018-19financial year. You have submitted the following evidence to substantiate your claim: · A report from the relevant Australian Government authority which confirms that the area where you were conducting your business activity has experienced severe weather conditions. · You submit that the special circumstances impacted on your business in the following ways: · Due to severe weather conditions toward the end of 2017 and in early 2018, your projected stock building strategy for your primary production business was firstly revised down in late 2017, and then in mid-2018 where it was abandoned altogether until such a time that the severe weather conditions subside, to allow depleted pastures to be revived along with increased surface water volumes. · The severe weather conditions intensified throughout winter 2018, which resulted in a decision to sell-off most of your livestock to pay for on-going feed supplements for the few remaining core livestock (comprising of mostly female livestock). · The remaining livestock are being held with a view to recommencing the primary production business activity in its previous scale once the severe weather conditions subside. · This has had a direct impact on the capacity for your business to earn assessable income. · It was not commercially viable for you to buy in fodder, given the high cost to merely sustain the livestock. · Based on your current year-to-date livestock on hand figures, you will not make $20,000 in assessable income in the 2019-20 financial year. You intend to make a profit and also make $20,000 in assessable income in the 2020-21 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)