Private ruling: Commissioner’s discretion for non-commercial losses
Date of advice: 13 September 2018
Published: November 2018
Ruling period: Year ended 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 business activity in your calculation of taxable income for the 20XX-XX 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, and that these special circumstances prevented you meeting one of the four tests. Consequently the Commissioner will exercise his discretion in the 20XX-XX financial year.

Relevant facts and circumstances: You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a business which commenced in late 20XX. You commenced business operations in the 20XX-XX financial year. You have met the assessable income test in the 20XX-XX, 20XX-XX and 20XX-XX financial years. You submit that you were affected by special circumstances in the 20XX-XX financial year, as you had a number of sellable items from your business activity stolen from your business location. Prior to the theft you had sold a number of these items in the 20XX-XX financial year, however the total of sales fell short $20,000. You have reported the stolen items to the local police authority. You have submitted the following evidence to substantiate your claim: ● Whilst you were unable to obtain a copy of the police report, the local police authority provided you with reference number for the police report. You submit that the special circumstances impacted on your business in the following way: ● As you were selling the items at approximately $XX each, and as you were unable to sell any further items due to the theft, your assessable income fell below $20,000 in the 20XX-XX financial year. ● As such, had it not been for the theft, you would have been able to sell the items and pass the assessable income test. You intend to make $20,000 in assessable income in the 2018-19 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)