Private ruling: Non-commercial losses - special circumstances
Date of advice: 30 September 2021
Published: December 2021
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise 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 in calculation of taxable income for the 20XX and 20XX income years? | A1: Yes. Having considered your circumstances and the relevant factors, the Commissioner has granted discretion. It is accepted that your business activity was affected by special circumstances outside your control, which caused you to make a loss in the 20XX income year and will also cause you to make a loss in the 20XX income year. Further information on the 'Commissioner's discretion - special circumstances' can be found by searching 'QC 61248' on ato.gov.au

Relevant facts and circumstances: You commenced your business activity in 20XX. You satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. A room in the building will be sublet to another business in 20XX. Special circumstances prevented you from meeting the assessable income test. COVID-19 prevented you from meeting the assessable income test as it reduced: • income that would have been used for advertising, • the spending habits of the community, • your ability to provide certain procedures due to restrictions, • customer intake due to self-isolation and stay at home notices, and • people attending appointments. You provided expected cash flow budgets for the 20XX to 20XX income years. You provided financial statements for the 20XX income year. You expected to make profits in the 20XX and 20XX income years, but for COVID-19. You were unable to claim COVID-19 business relief payments as you did not meet the income threshold. You expect your business activity to meet the assessable income test in the 20XX income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 35 | Income Tax Assessment Act 1997 Subsection 35-10(1) | Income Tax Assessment Act 1997 Subsection 35-10(2E) | Income Tax Assessment Act 1997 Section 35-30 | Income Tax Assessment Act 1997 Section 35-55 | Income Tax Assessment Act 1997 Paragraph 35-55(1)(a) | Income Tax Assessment Act 1997 Paragraph 35-55(1)(b)