Private ruling: Commissioner's discretion - non-commercial losses
Date of advice: 26 November 2021
Published: March 2022
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion under 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 the calculation of income for the 20XX-XX income year? | A1: Yes. Having regard for your full circumstances, it is accepted that your business activity was affected by special circumstances outside your control. It is also accepted that, but for the special circumstances you would have made a tax profit. Consequently, the Commissioner will exercise his discretion. For more information on non-commercial losses, please visit our website ato.gov.au and enter quick code "QC 33774" in the search area at the top of the page.

Relevant facts and circumstances: You do not satisfy the income requirement set out in subsection 35-10(2E) of the ITAA 1997 as your income in the 20XX-XX income year is over $250,000. You operate a farm. The combined land is approximately XXX acres. The income producing activity operates approximately XXX breeding ewes including approximately XXX stud breeding sheep. They also carry approximately XXX breeding cows with approximately XXX calves and weaners year-round. The region where you operate the farm is drought declared. This drought has inhibited the ability for the income producing activity to make a profit. You earned separate income from salary and wages. Due to COVID-19 your employment ceased, and you were paid out all of your outstanding employee entitlements. This payout caused your total income for the 20XX-XX income year to exceed $250,000.

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)