Private ruling: Non-commercial losses - special circumstances
Date of advice: 21 February 2022
Published: April 2022
Ruling period: Year ending 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 prevented you from making a tax profit. Consequently, the Commissioner will exercise his discretion in the 20XX-XX financial year.

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 Y business. You traded in the 20XX-XX financial year. In the 20XX-XX financial year special circumstances impacted the profitability of your business activity. Your business was impacted in the following ways: • Covid19 prevented you from operating for periods of time, resulting in decreased revenue • ill health resulted in absences from the business and having to hire other staff at additional cost. Your business has previously produced a profit. Your business met at least one of the four non-commercial loss tests and it was expected, if not for the special circumstances, your business would have made a tax profit in the 20XX-XX financial year. You intend to return to profit in the 20XX-XX financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 35-55(1)(a) | Income Tax Assessment Act 1997 subsection 35-10(2E)