Private ruling: Non-commercial losses and the Commissioner’s discretion
Date of advice: 8 December 2017
Published: April 2018
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: DDMMYY

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 primary production business activity in your calculation of taxable income? | A1: Yes. Having regard to 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, and you have met, or would have met one of the four tests. 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 less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a business of cattle grazing. You commenced business operations in the XXXX financial year. You hold between XXX and XXX head of cattle and XXXXX to XXXXX sheep, depending on current environmental impacts on the business. You submit that you were affected by drought conditions during the XXXX-XX to XXXX-XX financial years. This resulted in a significant loss of natural pasture which needed to be re-established. As a result during the XXXX-XX and XXXX-XX financial years you were forced to purchase additional fodder and pasture which was in excess of the normal expenses you would usually incur. You were also required to repair and upgrade water infrastructure as the usual water sources dried up during the extended dry spells. You were forced to reduce the sheep herd numbers in the XXXX-XX and XXXX-XX financial years due to the drought conditions. You are now in the process of rebuilding the stock numbers to normal levels. You have advised that had it not been for the extra expenses as a result of the drought conditions, the business would have been profitable for the XXXX-XX and XXXX-XX financial years. You provided a projected profit and loss statement to confirm that the business will be profitable in the XXXX-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)


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