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Edited version of private advice
Authorisation Number: 1051607456625
Date of advice: 19 November 2019
Ruling
Subject: Non-commercial business losses and the Commissioners discretion
Question
Will the Commissioner exercise the discretion to allow you to include any losses from your primary productionbusiness activity in your calculation of taxable income for the 20XX-XXto 20XX-XX financial years?
Answer
Yes.
Having considered your circumstances and the relevant factors the Commissioner has granted the discretion. It is accepted that your business activity was affected by special circumstances outside your control which caused you to make a loss. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au
This ruling applies for the following periods:
Year ended 30 June 20XX to year ending 30 June 20XX
The scheme commences on:
1 July 2007
Relevant facts and circumstances
You do not satisfy the income requirement set out in subsection 35-10(2E) of the ITAA 1997.
In 20XX you commenced a mixed primary production business activity (the activity). You undertake the activity as a sole trader on X acres of farmland that you have rented from an associated entity.
On XX December 20XX you applied for the Commissioner's discretion for non-commercial losses under the lead time limb.
During this application you provided independent evidence that attests to a commercially viable period of between X and X years for maximum return for the activity, with revenues generating between X and X years.
You projected that the activity would become profitable by the 20XX-XX financial year, based on activity growth as a result of historical average rainfall data from the bureau of meteorology.
As a result on XX February 20XX the Commissioner exercised his discretion under the lead time limb for the 201XX-XX to 20XX-XX financial years, indicating a X year commercially viable period for your activity.
On X September 20XX you again applied for the Commissioner's discretion for non-commercial losses under the special circumstances limb.
You submit that you were affected by special circumstances in the 20XX-XX, 20XX-XX and 20XX-XX financial years, causing the plantation to go into survival mode, stalling growth during the growing seasons, and delaying profitability by four years.
You have submitted the following evidence to substantiate your claim:
· historical rainfall data for the 20XX-XX to 20XX-XX financial years showing a significant reduction in rainfall during critical growing periods in the 20XX-XX, 20XX-XX and 20XX-XX financial years
· a detailed projected profit and loss statement for the activity after a return to historical rainfall averages
A return to historical rainfall averages will have a significantly positive impact on profitability of the activity over the current five year business plan, which projects a profit by the 20XX-XX 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)