Private ruling: Non-commercial losses and the Commissioner's discretion for special circumstances
Date of advice: 11 August 2017
Published: November 2017
Ruling period: Year ended 30 June 2016 to 30 June 2019
Date scheme commenced: 1 July 2015

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 2015-16 to 2018-19 financial years? | 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 also accepted that, but for the special circumstances, you would have made a tax profit, and you have met, or would have met one of the four tests. Consequently the Commissioner will exercise his discretion in the 2015-16 to 2018-19 financial years. For more information on non-commercial losses, please visit our website ato.gov.au and enter quick code QC 33774 into the search bar at the top right of the page.

Relevant facts and circumstances: You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a business as a partnership. The business is primarily concerned with stock sales. The business commenced operations in the 20XX-XX financial year. You submit that you were affected by special circumstances in the 2015-16 and 2016-17 financial years. You also expect to be affected by these special circumstances in the 2017-18 and 2018-19 financial years. You have submitted the following evidence to substantiate your claim: - Australian Bureau of Meteorology Rainfall Deciles map You submit that the special circumstances impacted on the profitability of your business in the following ways: - The extended period of drought has resulted in a diminishing supply of grass and fodder on the land - Drought affected stock were required to be sold at reduced prices - The decline in stock numbers was also affected due to attacks from wild dogs that were increasingly found on the property, most likely driven to the property to access an easy source of food - In order to protect the supply of stock, stock were moved to off-property agistment - Stock production was minimised due to poor drought feed conditions and the recent but increasing presence of wild dogs - The drought conditions have resulted in high costs of feed, transport and agistment - You have provided adjusted profit and loss statements which show had the special circumstances not occurred in the 2015-16 to 2018-19 financial years the business would have produced profits in each year. You intend to return to profit in the 2019-20 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)