Private ruling: Non-commercial business losses and the Commissioner's discretion
Date of advice: 12 December 2019
Published: February 2020
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the Commissioner exercise his discretion to allow you to include any losses from your primary production business in the calculation of your taxable income for the 2018-19 to 2020-21financial financials? | 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 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: You do not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the Income Tax Assessment Act 1997 . In 20XX you commenced a primary production business (the activity). You submit that the activity was affected by special circumstances. The special circumstances impacted on the profitability of the activity for the 20XX financial year in the following ways: · fences, plant and equipment and stock were destroyed, much of which was uninsured · expenses of the activity drastically increased, including: - depreciation expense claimed to replace lost capital items - contract work, feed, fences, equipment hire and repairs - the purchase of stock to replace those lost. · whilst the draft profit and loss for the 20XX financial year shows a loss, had the activity not been affected by special circumstances the activity was projected to have generated a profit. For future financial years the special circumstances are expected to impact on the profitability of the activity in the following ways: · an increase in anticipated expenses for the following: - replacement of boundary fencing, internal gateways and laneways - additional feed as all grass used in the activity has been destroyed, and - equipment replacements and repairs. · due to lack of feed you are expecting natural increase in stock to reduce significantly · income from the sale of stock is expected to be significantly less than average. If the activity can trade through the current conditions you project a 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) | Income Tax Assessment Act 1997 paragraph 35-55(1)(a)