Edited version of private advice

Authorisation Number: 1051884734477

Date of advice: 12 August 2021

Ruling

Subject: Commissioner's discretion for non-commercial business losses

Question

Will the Commissioner exercise the discretion to allow you to include your share of any losses from your partnership business in the calculation of your taxable income for the financial year ending 30 June 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 prevented your business from meeting the Assessable income test. Further information on non-commercial losses can be found by searching 'QC 33774' on ato.gov.au

This ruling applies for the following period:

Financial year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a partner of a partnership operating commercial X animal management services and contract farm work.

It's been claimed both partners of the partnership have extensive experience in the agricultural industry; both partners were engaged in the business and intended to develop the business to eventually become the partners' dominant income source.

The partnership holds the licence to harvest X animal for animal and human consumption. You have undertaken the necessary training and licensing as required under the relevant legislations.

In the first 6 months of the operation (July - December 20XX), the partnership generated business income that exceeded $10,000. After that, the business income was heavily reduced in the following 4 months (January - April 20XX), due to the effect of COVID-19.

The COVID-19 affected the business operations in two ways:

•         The harvested X animals are normally delivered to a local export abattoir and the partnership is paid by the abattoir based on the weight and quantity of the meat delivered (the partnership is not paid by the farmer who received the X animal management service). The abattoir was unable to export X animal meat overseas when the COVID-19 pandemic commenced in Australia. Consequently, they ceased accepting the harvested X animal for several months.

•         The partnership was not able gain other agricultural contract work as many farmers were reluctant to engage new contractors to work on their properties.

After the COVID-19 restrictions eased in regional XX, the partnership was able to recommence activities and generated a business income in May and June 20XX that was comparable to the income level of the first 6 months.

Your income for non-commercial loss purposes did not exceed $XXX,000 in this 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)