Private ruling: Non-commercial losses
Date of advice: 23 November 2017
Published: April 2018
Ruling period: Year ending 30 June 2017
Date scheme commenced: 1 July 2016

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 2016-17 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, and that these prevented you meeting one of the four tests. Consequently the Commissioner will exercise his discretion in the 2016-17 financial year. For more information on non-commercial losses, please visit our website www.ato.gov.au and enter quick code QC 33774 in the search area at the top of the page.

Relevant facts and circumstances: You are in the business of growing crops. You submit that you were you affected by special circumstances in the 2016-17 financial year. During your business activity, there was large rainfall over the region which resulted in poor crop growth. The rain did not decrease to allow the crops to develop and there were large amounts of surface water from the runoff of surrounding properties that maintained a high saturation of the soil. The crops suffered in not being allowed to extract nutrients and nitrogen from the saturated soil and failed to develop any worthwhile produce Accordingly, you cut down your crops and produced a number of bales valued considerably lower than what you would normally sell the crops for. You do not satisfy any of the four tests set out in Division 35 of the ITAA 1997 for the 2016-17 financial year. Your income for non-commercial loss purposes is over $40,000 but below the $250,000 threshold for the 2016-17 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)