Private ruling: Non-commercial losses
Date of advice: 30 April 2020
Published: June 2020
Ruling period: Income year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the Commissioner exercise the discretion to allow you to include any losses from your business in the calculation of your taxable income for the 2018-19 income 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 conduct your livestock business at your property. You currently have livestock. All of your property is an area severely affected by drought. You have agreed to the ATO using BOM information confirming this. Of the dams on your property only a few have some water. During the start-up period, your paddocks had only dry grass for your livestock to eat but there was enough for them so you had no need to purchase feed during this period. Consequently there were no drought related expenses during the start-up period. You had to buy feed in 2019 and 2020. If you were not in drought, feed costs would be lower and restricted to winter when grass is not growing. Your drought related expenses total approximately $X. You would have made a profit in the 2019/20 income year but for these additional expenses. You have provided a copy of your financials for the 2018/19 income year to support this. You expect to return to profit in the 2020/21 income year. You have livestock to sell in the months ahead and due to the purchased feed they are well fed and should get good prices. The bushfires came close to your property but yours was not burnt. Your circumstances resulted in your not passing the $20,000 assessable income test for the 2018/19 income year which you would have done but the purchase of feed and related expenses.

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)