Private ruling: The Commissioner's discretion for non-commercial business losses
Date of advice: 12 December 2019
Published: February 2020
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the Commissioner exercise the discretion to allow you to include any losses from your agribusiness in the calculation of your taxable income for the years ended 30 June 2017, 30 June 2018 and 30 June 2019? | 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 the profits test. You expect to pass the profits test in the year ending 30 June 2020. 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 <$250,000 income requirement set out in subsection 35-10(2E) of the Income Tax Assessment Act 1997 (ITAA 1997). You carry on a business of cattle farming. You commenced business on XX June 19XX. You operate as a partnership. You and your spouse live and work in another city and travel each Friday afternoon to operate the farm, returning to the city each Sunday night. You also spend all your annual leave from your jobs working on the farm. You submit that your business was affected by special circumstances in the 2017, 2018 and 2019 income years. You have experienced drought conditions in the 2013 income year and continuing low rainfall during the 2016 and 2017 years. As a result, feed bales and water prices increased substantially. You sold a large number of cattle at a time when cattle prices had fallen, and had to pay top prices to restock. You built hay storage facilities and water tanks to improve sustainability during drought years. These circumstances have resulted in you being unable to pass the profits test in the 2017, 2018 2019 income years. You expect to make a substantial profit in the 2020 income year .

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