Private ruling: Commissioner's discretion - non-commercial losses
Date of advice: 2 December 2021
Published: March 2022
Ruling period: XXXX financial year

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 business activity in your calculation of taxable income for the 20XX 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 from making a tax profit. Consequently, the Commissioner will exercise his discretion in the 20XX and 20XX financial year

Relevant facts and circumstances: You carry on a XX business. You commenced business operations in XXXX of the 20XX financial year. COVID-19 restrictions impacted the profitability of your business activity. Your business was impacted in the following ways: • The prolonged lockdowns affected the main target markets; businesses operating in the hospitality and tourism industries, corporate customers, international and local tourists. • The COVID-19 impact also had an impact on the automotive sector, there was a shortage of vans and cars available for sale. This caused a delay as to when you could commence the XXXX business and consequently the turnover as projected. You intend to make a tax profit from the 20XX financial year. You do not satisfy the $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.

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)