Private ruling: Non-commercial losses- special circumstances
Date of advice: 8 January 2019
Published: April 2019
Ruling period: Year ended 30 June 20XX to 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 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. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au

Relevant facts and circumstances: You acquired a business in late 20XX. The business consisted of land and established trees. The Commissioner previously granted a discretion for lead time as the commercially viable period for the trees is generally three to six years. You have provided a summary of the history of the business over the previous financial years: n 20XX-XX – systematic pruning and application of fertiliser and compost n 20XX-XX – more trees were to be planted but due to a supply shortage of trees, no trees were purchased. Continued management and maintenance of existing trees and farm. n 20XX-XX – trees were planted and continued management and maintenance of trees and farm. n 20XX-XX– loss of the recently planted young trees and flowering fruit buds due to extreme weather events. Continued management and maintenance of trees and farm. n 20XX-XX – replacement trees were planted. Continued management and maintenance of existing trees and farm. You have demonstrated that special circumstances affected the business in the 20XX-XX and 20XX-XX financial years and as a result will also impact the 20XX-XX to 20XX-XX financial years. Due to the extreme weather events the commercial production of the fruit has been set back approximately another three to four years. You have provided a projected profit and loss statement that shows but for the special circumstances the business would have met the assessable income test for the 20XX-XX to 20XX-XX financial years and you expect that the business will produce 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)