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Edited version of private advice
Authorisation Number: 1051667408570
Date of advice: 28 April 2020
Ruling
Subject: Commissioner's discretion for non-commercial losses
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 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 his discretion. It is accepted that your business activity was affected by special circumstances outside your control which prevented you from passing a test. Consequently the Commissioner will exercise his discretion to extend the lead time to 30 June 20XX.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.
You carry on a primary production business of growing produce which commenced over XX years ago.
The generally accepted time for the produce you are growing to begin fruiting is in year three but larger quantities of fruit are not normally obtained until year six, when the trees are classed as 'bearing'. As such we accept a lead time of six years for your business activity.
You submit that you were affected by special circumstances (the trees being affected by an adverse condition) in the 20XX-XXfinancial year.
You have submitted the following evidence to substantiate your claim:
· A letter from an industry expert confirming that they saw evidence of the adverse condition in the branches of the trees.
You submit that the special circumstances impacted on your business in the following ways:
· You expected to make profit from the sales of the produce from your trees in the 20XX-XX financial year, however your trees were infected by the adverse condition which effects the trunk and limbs of the trees.
· -This resulted in a significant number of your trees dying and you had to heavily cut back an even bigger number of the remaining trees.
· This meant that you had no produce which could be sold in the 20XX-XX financial year.
· You expect that the trees that remained will recover and produce fruit in the 20XX-XX financial year, which will result in profitable sales in the 20XX-XX financial year.
You intend to make a profit/make $XXX in assessable income in 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)