Private ruling: Non-commercial losses - Commissioner's discretion
Date of advice: 18 December 2019
Published: March 2020
Ruling period: Year ending 30 June 2019
Date scheme commenced: 1 July 2018

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 business activity in the calculation of your taxable income for the 2018-19 financial year? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner has exercised the discretion. It is accepted that your business activity was affected by special circumstances outside your control which caused you to make a loss. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au

Relevant facts and circumstances: You are a professional and operated your own private practice. Due to illness you closed your private practice part way through the year. Your business relied solely on your ability to manage the business and could not operate without your involvement. Due to the nature of the business, income continued to be received for work invoiced earlier; however, commercial responsibilities required certain expenses to be ongoing even though no income was being earned. Therefore the business activity has resulted in an overall loss. If you had not become unable to work due to your illness you would have continued to work and the business would have made a tax profit as it has done in previous years. You received an income protection payment and as a result of receiving this payment you do not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.

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)