Private ruling: Non-commercial losses - Commissioner’s discretion – special circumstances
Date of advice: 17 April 2019
Published: June 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Will the Commissioner exercise the discretion in section 35-55 of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your business in the calculation of your taxable income for the year ended 30 June 20YY? | A1: Yes. It is accepted that your business activity was affected by special circumstances outside your control and that these circumstances prevented you from passing one of the four tests. You expect to pass one of the four tests in the year ended 30 June 20YY. 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. You commenced business operations in May 20XX. You operate as a sole proprietor. You had undertaken a course to assist you to grow and develop your business. You submit that your business was affected by special circumstances, as you developed an acute illness in January 20XX. The illness made you unfit for work for the remainder of the year ending 30 June 20XX, which has resulted in you being unable to pass any of the four tests in the year ended 30 June 20XX. Before you became ill, you had X clients ready to undertake your X week program, each due to commence between January 20XX and March 20XX. Each package would cost $X. You had also projected that by following the strategies you learned from the course, that between March 20XX and June 20XX you would be working with another eight clients on a similar arrangement. You projected that these activities would generate a minimum of $X of assessable income for the period from January 20XX to June 20XX. In addition to the individual programs, you had planned to start running courses and offering training in your chosen field. You expect to make $20,000 in assessable income in the financial year ended 30 June 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 35-10(1) | Income Tax Assessment Act 1997 subsection 35-10(2A) | Income Tax Assessment Act 1997 subsection 35-10(2E)