Private ruling: Commissioner's discretion - non-commercial losses
Date of advice: 5 December 2024
Published: 20 January 2025
Ruling period: Year ended 30 June 2023
Date scheme commenced: 1 July 2022

Ruling: Q1: Will the Commissioner exercise his 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 cryptocurrency trading business in the calculation of your taxable income for the 2022-23 financial year? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner has granted his discretion to allow you to include the losses in the calculation of your taxable income for the 2022-23 financial year. It is accepted that your business activity was affected by special circumstances outside your control, where your trading stock was lost when you were unable to withdraw it from the platform, which caused you to make a loss. As you made a profit in the 2021-2022 financial year there are no losses to be included in the calculation of your taxable income for that year.

Relevant facts and circumstances: You do not satisfy the less than $250,000 income test under subsection 35-10(2E) of the Income Tax Assessment Act 1997 (ITAA 1997) . You are an employee in an unrelated field. You commenced a business of trading in cryptocurrency, where you applied your skills from your employment and your previous knowledge and experience gained from trading in shares, options, foreign currencies and gold. During the relevant year, you became aware of an online trading platform that specialised in short term buy and sell transactions of certain cryptocurrencies. You applied for an ABN. You wrote a detailed business plan with short term objectives including: • A set profit per annum from cryptocurrency trading and hedging, and • A minimum of 10 trades per month with set values. You acquired crypto tether on cryptocurrency exchanges. After you had a number of discussions with people claiming to work for the platform, you transferred your inventory from the cryptocurrency exchanges to the platform. You transferred trading stock to the platform over 3 months. You withdrew amounts periodically over the period to test the legitimacy of the platform. From commencement of your activity to 30 June 2022 you: • Committed a significant amount trading stock into the platform, • Made 48 transactions for the short term buy and sell of crypto, and • Made a profit. You spent 3-4 hours daily on average completing trend analysis totalling approximately 420 hours from the commencement of your trading activities until you ceased your business. In July 2022 you acquired further crypto, which you transferred to the platform. You traded through the platform deriving a profit from trading. You incurred commission fees charged by the platform for the 2021-22 and 2022-23 financial years. You attempted to withdraw your funds from the platform in the 2022-23 financial year several times. You were unable to withdraw or recover your trading stock. Your cryptocurrency has been misappropriated and you are unable to recover it. You acquired the services of an international fraud recover agency to recover your trading stock at an additional cost. The recovery attempt was unsuccessful. You ceased your business after you lost access to your trading stock.

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 35-55(1)(a)