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Edited version of your private ruling

Authorisation Number: 1012566642642

Ruling

Subject: Non-commercial losses - Commissioner's discretion

Question 1

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 in your calculation of taxable income for the 2012-13 financial year?

Answer

Yes.

This ruling applies for the following period(s)

Year ending 2013

The scheme commences on

1 July 2012

Relevant facts and circumstances

You operate a primary production business activity.

In early 2013, a major flooding event occurred in the region where the property is situated and the entire farm was covered in flood water for six days.

As a result, pastures and fencing were lost and livestock have only recently been able to return to the property.

Many farmers were forced to sell their livestock resulting in a drop in prices in the local market.

The assessable income from the activity in the 2012-13 financial year was less than $20,000.

The activity passed the assessable income test in the 2011-12 financial year.

Your income for non-commercial loss purposes in the 2012-13 financial year was less than $250,000.

Relevant legislative provisions

Income Tax Assessment Act 1997 - Division 35

Income Tax Assessment Act 1997 - section 35-10

Income Tax Assessment Act 1997 - Paragraph 35-55(1)(a).

Reasons for decision

You have requested that the Commissioner exercise the discretion under paragraph 35-55(1)(a) of the ITAA 1997 for special circumstances. 

The discretion in paragraph 35-55(1)(a) of the ITAA 1997 may be exercised where:

Taxation Ruling TR 2007/6 set out the Commissioners interpretation of the exercise of the Commissioners discretion under paragraph 35-55(1)(a). The following has been extracted from paragraphs 47 to 53 of this Ruling:

In your case, your primary production activity was affected by a major flooding event which covered the property with water for almost a week.

It is accept that these conditions were outside your control and are 'special circumstances' for the purposes of paragraph 35-55(1)(a) of the ITAA 1997. However, before the Commissioner can exercise the discretion you must be able to show that it was the special circumstances that prevented your activities from meeting one of the tests.

Your business activity passed the assessable income test in the 2011-12 financial year. However, due to the flooding event in the region, many farmers were forced to sell their livestock resulting in a drop in prices in the local market. As a result, the assessable income from your activities in the 2012-13 financial year was less than $20,000.

The Commissioner is satisfied that your activities would have met one of the four tests if it had not been affected by special circumstances.

Therefore, the Commissioner will exercise the discretion in paragraph 35-55(1)(a) of the ITAA 1997 to allow you to offset the losses made from your activities against your other assessable income for purposes of calculating your taxable income for the 2012-13 financial year.


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