Private ruling: Non-commercial business losses
Date of advice: 31 August 2021
Published: November 2021
Ruling period: Financial year ending 30 June 20XX | Financial 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 and 20XX financial years? | 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 and 20XX financial years.

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 XX tourism business. You commenced business operations in the last month of the 20XX financial year (the first financial year concerned). In the first financial year concerned and the following financial year, COVID-19 restrictions impacted the profitability of your business activity. Your business was impacted in the following ways: • In the first financial year concerned, due to the travel restrictions, the business did not derive any business income. • In the following financial year, with the travel restriction started to ease, the business commenced deriving business income. However, it is expected that the business could have derived higher income if not affected by the COVID restrictions. You intend to make a tax profit from 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)