Private ruling: Non-commercial loss discretion - special circumstances for greater than $250,000 - beef cattle farming
Date of advice: 5 March 2026
Published: 20 April 2026
Ruling period: Year ended 30 June 2025
Date scheme commenced: 1 July 2024

Ruling: A1: No .

Relevant facts and circumstances: You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. Your business commenced in July 20XX. You are in the business of beef cattle farming. You own X acres of land which is valued at over $XXX,000. You submit that you were affected by special circumstances in the 2025financial year as you received a one-off payment.

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)

Reasons for decision: Summary: For the 2009-10 and later financial years, Division 35 of the ITAA 1997 will apply to defer a non-commercial loss from a business activity unless: • you satisfy the income requirement, and you pass one of the four tests • the exceptions apply, or • the Commissioner exercises his discretion. In your situation, you do not satisfy the income requirement (that is your taxable income, reportable fringe benefits and reportable superannuation contributions but excluding your business losses, exceeds $250,000) and you do not come under any of the exceptions. Your business losses are therefore subject to the deferral rule unless the Commissioner exercises his discretion. The relevant discretion may be exercised for the financial year in question where your business activity is affected by special circumstances outside your control. 'Special circumstances' are those circumstances which are sufficiently different to distinguish them from the circumstances that occur in the normal course of conducting a business activity, including drought, flood, bushfire or some other natural disaster. For individuals who do not satisfy the income requirement, the business activity must have been materially affected by the special circumstances, causing it to make a loss. In this context, the Commissioner may exercise this discretion for the income year(s) in question where, but for the special circumstances: • your business activity would have made a tax profit • the activity passes at least one of the four tests or, but for the special circumstances, would have passed one of the four tests. Although not limited to natural disasters, paragraph 35-55(1)(a) of the ITAA 1997 refers to special circumstances outside the control of the business activity, including drought, flood, bushfire or some other natural disaster. Cyclones, hailstorms and tsunamis are examples of other natural disasters that would come within the scope of the paragraph. These events are taken to be special circumstances outside the control of the operators of the business activity. The special circumstances must have affected the business activity. In your case, you received a one-off payment in the 2025 financial year. Receiving this payment did not affect your business activity in the relevant year, causing it to make a loss. Instead, it caused you to fail the income requirement under subsection 35-10(2E) of the ITAA 1997. This is not considered to be special circumstances for the purposes of paragraph 35-55(1)(a) of the ITAA 1997. While we appreciate your situation, there is no other discretion available to the Commissioner in Division 35 of the ITAA 1997 that would allow you to claim your losses in the circumstances you describe.

Subject: Non-commercial loss discretion - special circumstances for greater than $250,000 - beef cattle farming: 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 2025 financial year?