Private ruling: Commissioner’s discretion for non-commercial losses
Date of advice: 8 November 2018
Published: February 2019
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion to allow you to include any losses from your business in the calculation of your taxable income for the 20XX-XX and 20XX-XX financial years? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner has granted his discretion. It is accepted that your business activity was affected by special circumstances outside your control which prevented you from passing a test. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au

Relevant facts and circumstances: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a business which commenced in 20XX. Your business activity involves providing a specific service to other businesses within the primary production industry. You made over $XY in assessable income in the 20XX-XX and 20XX-XX financial years. You submit that you were affected by special circumstances, which were conditions affecting primary production businesses the area in which you undertake your business operations (the conditions) in the 20XX-XX financial year, and you also submit that you will be affected by these special circumstances in the following financial year. You also submit that as the conditions had a direct effect on primary production businesses within your working area, this also had a direct impact on your business operations, given the nature of your business activity. You advise that the conditions first commenced in late 20XX. The conditions first had an impact on primary production businesses the area in which you undertake your business operations in the 20XX-XX financial year, and this extended into the 20XX-XX financial year where you were unable to make $XY in assessable income, along with the following financial year (the current financial year) where you do not expect to earn any assessable income. As a result of the conditions, you will not be able to undertake your business operations until late in 20XX. During a phone conversation between your authorised tax agent and a representative from the ATO in late 20XX, your tax agent agreed to use the following third party evidence to substantiate your claim: ● Various reports from local Government authorities covering the relevant periods, which confirm that the area where you conduct your business operations (providing service to primary production businesses) were affected by the conditions. You submit that the special circumstances impacted on your business in the following ways: ● As the conditions affected relevant primary production businesses, you had no opportunity to undertake your business activity. ● Due to this, you had no ability to earn assessable income. You intend to make $XY in assessable income in 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)