Private ruling: Non-commercial losses - special circumstances
Date of advice: 14 April 2022
Published: July 2022
Ruling period: Period ended 30 June 20XX
Date scheme commenced: 1 July 20XX

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 for the 20XX income year? | 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 accepted that but for the special circumstances, you would have made a tax profit. Consequently, the Commissioner will exercise his discretion in the 20XX income year.

Relevant facts and circumstances: You purchased an existing business activity of primary production. Hailstorms caused major crop losses. As a result, the 20XX harvest was much less than the previous year. As well as the hailstorms, your XXX processor advised they would no longer be buying XXX. You engaged another processing plant to have the XXX processed and packaged for you to sell directly to consumers. A minimum tonnage was required for processing which meant you had to hold onto stock before processing could begin. This caused a delay in your sales timeline. The business was profitable in previous years and expects to be profitable in future years. Your income for non-commercial loss purposes is over $XXX,000. You met the assessable income test, the real property test and the other assets test in the relevant income 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)