Edited version of private advice

Authorisation Number: 1051804201840

Date of advice: 11 February 2021

Ruling

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

Question

Will the Commissioner exercise the discretion to allow you to include any losses from your business activity in the calculation of your taxable income for the 20XX-XX financial years?

Answer

Yes

Having regard to your full circumstances, it is accepted that your business activity was affected by special circumstances outside your control. It is also accepted that, but for the special circumstances, you would have made a tax profit, and you have met one of the four tests. Consequently, the Commissioner will exercise his discretion. For more information on non-commercial losses, please visit our website ato.gov.au and enter quick code "QC 33774" in the search area at the top of the page.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

01 July 20XX

Relevant facts and circumstances

Your income for non-commercial loss income test purpose exceeded $250,000 in each of the relevant financial years.

You carry on a business of farming from 19XX.

The grazing property, which covers XX hectares, locates at XXXX. It has the capacity to carry XX and XX in an average season.

You resided at the farm. You work for 50-60 hours per week on the farm.

From the winter of 20XX, the property has been significantly affected by drought. As a result of the drought condition:

•         Stock numbers decreased by the end of 20XX, sheep and cattle numbers were down to less than half the number carried in early 20XX. Any old or surplus stock were sold early, followed by reductions in breeder numbers as the outlook deteriorated.

•         the feed cost significantly changed.

The bushfires in 20XX caused severe damages to the property, including:

•         Approximately XX kilometres of fencing damaged, including XX kilometres destroyed

•         X% of pasture burnt

•         X kilometre of polythene piping to stock troughs destroyed

Rainfall in January - February 20XX ended the fire problem and brought a better weather pattern through the year. However,

•         Much of the burnt ground is affected by weed infestation.

•         Spraying the weeds is in progress

•         An aerial pasture reseeding programme is planned for autumn 20XX

•         Some of the repairs have been completed, but a lot work remains.

Due to the bushfire, it is expected that the business will not be profitable until 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)