Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 24 February 2020
Published: April 2020
Ruling period: Year ending 30 June 20XX | Year ending 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 primary production business in the calculation of your taxable income for the 20XX-XX to 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. Consequently the Commissioner will exercise his discretion to extend the lead time to 30 June 20XX. 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 of growing produce and production of a related product from the produce which commenced in the 20XX-XX financial year. You also operate another primary production business activity on the same property which you consider to be separate from the first-mentioned activity. In early 20XX the Commissioner exercised discretion to allow you to include any losses from the business activity in the calculation of your taxable income for the 20XX-XX to 20XX-XX financial years. In that application it was stated that the business will produce assessable income greater than allowable deductions in the 20XX-XX financial year. You submit that you were affected by special circumstances (severe weather conditions) in the 20XX-XX and 20XX-XXfinancial years. You have submitted the following evidence to substantiate your claim: · A special weather report from an Australian Government authority confirming that the area where you conducted your business activity has suffered the effects of severe weather conditions from early in 20XX to late 20XX. · A Season Update dated in late 20XX issued by the relevant local association for your industry. You submit that the special circumstances impacted on your business in the following ways: · Due to the impact of the severe weather conditions from 20XX onwards, your crop yields have dropped significantly. Your 20XX crop only yielded less than half of the expected harvest. Your 20XX crop will be zero tonnes. · The 20XX crop has been significantly impacted by the severe weather conditions which has impacted the growth of your specific produce. · An expert within your industry has verbally advised you that due to the impact of the severe weather conditions, your crops may take between 12 to 18 months to recover to their original condition prior to the impact of the severe weather conditions. Based on the annual growing cycle of your crops and on further discussions with members of the local association within your industry, this estimation is deemed to be reasonable. Until this time, you will not be able to generate enough income to make $20,000 in assessable income. In order to try and mitigate the impact of the severe weather conditions in the future you have installed specific plant and equipment. This was recommended in the supplied Season Update issued by the relevant local association for your industry. You project to make a profit 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)