Private ruling: Non-commercial business losses and the Commissioner's discretion
Date of advice: 14 February 2020
Published: March 2020
Ruling period: Financial years ended 30 June 20XX | Financial years ended 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 primary production business in the calculation of your taxable income for the 20XX-XX and 20XX-XX financial years. | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner will exercise 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: Your income for non-commercial loss purposes for the 20XX-XX financial year is greater than $250,000. You expect to fail the income requirement in future years. You commenced a primary production business activity (the activity) on prime farming country in the 20XX-XX financial year. You commenced the activity with the purchase of a number of livestock in the 20XX-XX to 20XX-20XX financial years. You submit that activity has been affected by special circumstances since early in the operation, and has progressively worsened. Further the region has recently been affected by other special circumstances, increasing operational costs and extending the period of time necessary for the activity to become profitable. The special circumstances have affected the activity in the following ways: · some livestock were sold prematurely and underweight as the special circumstances were deteriorating their condition · not all the livestock became pregnant, or they produced less offspring due to their poor condition, further extending the period of time necessary for the activity to be profitable · pasture growth on your property was insufficient to sustain the livestock and grow the progeny to their required weight for selling, increasing the need to purchase fodder · the fodder sowed in the 20XX-XX financial year did not grow sufficiently, further increasing the need to purchase fodder · the special circumstances has resulted in poor quality natural pasture, making it necessary for feed supplementation to boost nutrients, increasing the cost of animal upkeep · because of the poor quality feed, progeny is generally of less quality and/or have illnesses, increasing animal health costs such as medicine and vet bills · special circumstances in the area have reduced the supply of fodder, increasing the livestock feeding cost for farmers · the special circumstances have forced you to delay increasing the number of breeding stock in the activity until the special circumstances have ceased. Had the special circumstances not adversely affected the activity it would have been profitable within the commercial viable period for your industry. The activity is projected to be profitable in the 20XX-XX financial year, provided the special circumstances are less severe or ceases.

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)