Private ruling: Non-commercial losses and the Commissioner's discretion
Date of advice: 5 July 2019
Published: September 2019
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2020
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 primary production business in the calculation of your taxable income for the 2017-18 2018-19 financial years? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner has granted his discretion. It is accepted that your business activity was affected by special circumstances outside your control which prevented you from passing a test. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au

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 primary production business which commenced in 19XX. You submit that you were affected by special circumstances in the 2018-19 and 2019-20financial years. You have submitted the following evidence to substantiate your claim: · Confirmation from a local Government Department website that the area where you carry on your business was affected by the special circumstances leading into and during the 2018-19 financial year. You submit that the special circumstances impacted on your business in the following ways: · As a direct result of the special circumstances, the quantity and quality of the pasture on the land was insufficient to sustain livestock, and as such in December 2018 you were forced to sell all of your opening livestock from 1 July 2018, leaving you with no remaining livestock. · As at May 2019 there is little or no grass on your property, and even if the property receives some water over winter 2019, it will take many months for the grass growth to be sufficient to support grazing. As such, even if grass growth returns between the middle and end periods of 2019, and you then purchase more livestock, it will take up to 12 more months before those livestock are big enough to sell. · Given this, as a direct result of the special circumstances you do not expect to meet the assessable income test until the 2020-21 financial year. · Whilst there was the option of buying fodder and water, this was not a sensible fiscal option for you, given the increased costs of fodder from the sellers, and with water being in short supplies this also meant that cost was high.

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)