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Edited version of private advice
Authorisation Number: 1051857821761
Date of advice: 30 June 2021
Ruling
Subject: Non-commercial losses
Question
Will the Commissioner exercise the discretion to allow you to include any losses from your primary production business in the calculation of your taxable income for the financial years ending 30 June 20XX and 20XX?
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 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 period periods:
Financial year ending 30 June 20XX
Financial year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are a partner in partnership.
The farm is run on your land by your business partner, with the sale of XX being the main source of income. The profits and expenses are divided between you and your business partner.
The location of your farm has been affected by drought from 20XX. You provided drought reports from the Bureau of Meteorology to support that the drought continued into the 20XX and 20XX financial years.
Due to the drought and lack of soil moisture, the grain failed to grow to the basic standard of quality for sale, resulting in no income being earned. While the expenses continued being incurred, the business made losses.
If the region was not in drought, it was expected
• the business activity would have made a tax profit; and
• the business would have derived assessable income of $XX and passed the assessable income test of producing an assessable income of at least $20,000.
It is unknown when the farm will be able to produce crops meeting basic standard of quality for sale and produce income.
Your income for non-commercial loss purposes exceeded $250,000 in 20XX financial year, and it is expected to exceed $250,000 in 20XX 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)