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Edited version of private advice
Authorisation Number: 1052095572315
Date of advice: 6 April 2023
Ruling
Subject: Commissioner's discretion - special circumstances
Question
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 financial year?
Answer
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 financial year.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commenced on:
30 June 20XX
Relevant facts and circumstances
You do not satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.
In the 20XX financial year, you commenced your farm activity. It employs full-time and part -time staff.
In the 20XX financial year, the activity failed to produce a tax profit due to a mice plague which compounded factors caused by the previous years of drought and COVID-19. The mouse plague started in the spring of 20XX, when the farmers were harvesting a bumper crop and ended around December 20XX.
Your business was impacted in the following ways:
• Crops were destroyed so that the diseases were not spread to livestock.
• The mice damaged more than 10% of crops for the year which would have been ready for harvest before the end of the 20XX financial year.
• Lost multiple livestock due to the mouse plague, occurred by poisoning the mice on the property. By using either anti-coagulants or zinc phosphide, the actual bait itself is a poisoning risk to livestock if present in the hay when it is feed to the livestock (see article "Mice Contaminated Hay - What's the Risk" 28 January 2021).
• There was a large amount of damage to machinery and vehicles which needed to have wires repaired and parts replaced.
Financial Statements indicate a profit for the year ended 30 June 20XX.
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)
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