Private ruling: Commissioner's discretion for non-commercial losses
Date of advice: 23 October 2017
Published: March 2018
Ruling period: Year ending 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 financial 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 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 20XX financial year.

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 are a partner in a partnership that carries on a business. The business was affected by special circumstances in the 20XX financial year. The business is generally operated: ● Purchasing livestock to fatten up before selling. ● The most productive fattening time for the livestock is between January and June in a given year. You have submitted the following evidence: ● Average rainfall and current year rainfall statistics; and ● Previous years’ partnership returns. The special circumstances impacted on the profitability of your business in the following ways: ● The significantly low rainfall in the area meant that less grass was grown to feed and fatten the livestock; ● As a result the livestock put on less weight than normal and were not ready for sale at the usual time, prior to the end of the 20XX financial year; ● Many farmers in the area were in a similar situation, which resulted in more livestock being sold and the prices being driven down; and ● Demand from feedlots (your traditional main selling outlet) was much lower, resulting in lower and more volatile prices. You intend to return to profit in the 20XX 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) and | Income Tax Assessment Act 1997 subsection 35-55(1)(a).


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