Private ruling: Commissioner's discretion for special circumstances
Date of advice: 17 July 2017
Published: November 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: May 2000

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 activity in your calculation of taxable income for the 2015-16 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. It is also accepted that, but for the special circumstances, you would have made a tax profit, and you have met, or would have met one of the four tests. Consequently the Commissioner will exercise his discretion in the 2015-16 financial year. For more information on non-commercial losses, please visit our website at https://www.ato.gov.au/Business/Non-commercial-losses/, or search quick code QC 33774 at www.ato.gov.au.

Relevant facts and circumstances: You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997. You carry on a business primarily concerned with stock breeding. You submit that you were affected by special circumstances in the 2015-16 financial year. You submit that the special circumstances impacted on the profitability of your business in the following ways: ● Your district has been suffering with severe drought conditions which have negatively impacted the health of the younger stock that are used for breeding in the business ● Due to the drought conditions, the native pasture has been seriously degraded and it has been necessary to start hand feeding stock. This has resulted in higher fodder and fuel costs. ● The ongoing effects of the drought have caused constant wear and tear on farm equipment including bores, dams and windmills. Substantial expenditure was required to make repairs to these assets as a result of the increased use and deterioration. ● In previous years you hired out your farming equipment to generate supplement income. From the 2014-15 financial year you were unable to generate this income as you needed the equipment to maintain your own farm as the drought conditions worsened. ● Freight and cartage expenses increased as water was required to be transported in to the farm as there was not enough natural rainfall to provide for livestock. ● Significant expenditure was made on repairing water storage, water conveying equipment and installation of new fences. You have provided a projected profit and loss statement that suggest that had the special circumstances not occurred in the 2015-16 financial year, the business would have produced an estimated profit of $XX You intend to return to profit in the 2016-17 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)