Private ruling: Income tax - tax losses - non-commercial losses - Commissioner's discretion - special circumstances
Date of advice: 24 March 2026
Published: 18 May 2026
Ruling period: Year Ended 30 June 20XX
Date scheme commenced: July 20XX

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 non-primary production business activity in your calculation of taxable income for the 20XX-XX financial year? | A1: Yes. Summary It is accepted that your business activity was affected by special circumstances outside your control and that these prevented you from making a profit and meeting one of the four tests. Consequently, the Commissioner will exercise their discretion in the 20XX-XX financial year.

Relevant facts and circumstances: You do not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carried on a liquor re-seller business, where your primary market for online bottle sales and on-premises sales is in X. You commenced business operations in the 20XX-XX financial year. Your business has previously produced a profit in the 20XX-XX and 20XX-XX financial years. Your business has previously produced a loss in the 20XX-XX to 20XX-XX financial years. You purchased empty liquor casks from cooperages to be manufactured into a smaller format. The cooperages then manufactured the casks. You then forwarded the casks to distilleries. The distilleries manufactured the distillate spirit. You purchased the spirit from the distilleries. The distilleries then filled the casks with the spirit you purchased. The distilleries then held the casks to be matured. The liquor was required to be matured for at least X years to be legally sold as liquor in Australia. The liquor was then released into your hands. You then bottled the liquor, sometimes with the assistance of the distillery. You then stored the liquor at a storage facility. You then sold the liquor. Your business was impacted by the COVID-19 pandemic. There was also a market downturn which commenced in the 20XX-XX financial year. Your business has also produced a loss in the 20XX-XX financial year. You are seeking the Commissioner's discretion to allow you to include any losses in your calculation of taxable income for this financial year. Your business does not satisfy the assessable income test, profits test, real property test or other assets test. In the 20XX-XX financial year the aftermath of robberies at the storage facility affected the profitability of your business activity. The first robbery occurred in XX 20XX. As this was near the conclusion of the 20XX-XX financial year, the impacts of this robbery were predominant in the 20XX-XX financial year. After this robbery, you resituated the liquor to another area in the storage facility. As a result of the first robbery, you wrote to the storage facility advising your concerns; however, they were dismissive. You sought for changes and raised grievances. You also consulted legal professionals on a casual basis. Despite this, the storage facility did not take any actions to prevent further robberies as far as you are aware. The second robbery occurred in XX 20XX. The robberies resulted in an unrecoverable loss of a significant amount of liquor. As a result, your business incurred less revenue than expected in the 20XX-XX financial year. There was no recovery possible through insurance as there was a drawn-out dispute between yourself and the storage facility. Furthermore, you experienced psychosocial harm which caused difficulty for you to operate your business. For the 20XX-XX financial year, your business incurred income of less than $20,000 and incurred a loss. Had the robberies not occurred, you estimate your business to have incurred income of greater than $20,000 and to have incurred a profit. You have transferred your business to another legal entity upon the commencement of the 20XX-XX 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)