Disclaimer
This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au

This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private ruling

Authorisation Number: 1011592414860

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Non-commercial losses - Commissioner's discretion - special circumstances

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 non-primary production activity in your calculation of taxable income for the 2009-10 income year?

Yes.

Relevant facts

You commenced your business activity in a past income year.

This business activity generated income in a past income year.

The business activity ceased as a result of circumstances out of your control.

Reasons for decision

Summary

The Commissioner will exercise the discretion under paragraph 35-55(1)(a) of the ITAA 1997 in relation to your non-primary production activity for the 2009-10 income year.

Detailed reasoning

Division 35 of the ITAA 1997 applies to losses from certain business activities for the 2000-01 income year and subsequent years. Under the rule in subsection 35-10(2) of the ITAA 1997, a 'loss' made by an individual (including an individual in a general law partnership) from a business activity will not be taken into account in an income year unless:

Generally, a 'loss' in this context is, for the income year in question, the excess of a taxpayer's allowable deductions attributable to the business activity over that taxpayer's assessable income from the business activity.

The exception in subsection 35-10(4) of the ITAA 1997, has no relevance for the purpose of this ruling as your activity is not a primary production or a professional arts business.

You have satisfied the income requirement in subsection 35-10(2E) of the ITAA 1997 as the relevant income is less than $250,000.

Paragraph 35 of the Taxation Ruling TR 2001/14 explains that carrying on a business activity requires that a business be carried on, as that term is ordinarily understood. Paragraph 98 of the ruling sates, for a business activity to have commenced a person must have:

In your case you commenced your non-primary production activity in a past income year. This business passed the assessable income test in the first year of operation.

The business ceased temporarily in a past income year

You did not earn any income from another activity.

To ascertain if the second business activity is considered a continuation of your original business activity we made a comparison of various factors.

An overall comparison shows significant similarities between the two activities such as the services provided, the same targeted market and similar market conditions.

The overall impression gained from this analysis of the two activities is that the second activity was a continuation of the original activity. Therefore, the assessable income and the allowable deductions attributed to the two activities will not be considered separately for taxation purposes.

Commissioner's discretion

For special circumstances to be considered, it will not only be necessary that an event or situation has occurred which is of itself unusual, but that it has resulted in the business activity failing to pass a test. Clearly, if the business activity would not have passed a test even if the event or situation had not arisen, we cannot say that the business activity was affected by special circumstances in the sense in which this term is used in paragraph 35-55(1)(a) of the ITAA 1997.

The information that you have provided demonstrates that your business activity would have passed one of the tests in the 2009-10 income year, had it not been for the special circumstances. This expectation is accepted as being reasonable based on past performance of your business activity.

It is accepted that the special circumstances were outside of your control.

Therefore, the Commissioner's discretion under paragraph 35-55(1)(a) of the ITAA 1997 has been granted for the 2009-10 income year.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).