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Edited version of private advice
Authorisation Number: 1051919108603
Date of advice: 8 November 2021
Ruling
Subject: Commissioner's discretion - 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 business activity in your calculation of taxable income for the 20XX and 20XX 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 and that these prevented you meeting one of the four tests. Consequently, the Commissioner will exercise his discretion in the 20XX and 20XX financial years.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences 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 and your partner operate a business with the purpose of selling meat and breeding stock.
You commenced business operations in the 20XX financial year.
Prior to the 20XX financial year, severe drought affected the area where your business is located. It impacted or will impact your ability to meet the assessable income test for the 20XX and 20XX financial years.
Your business was impacted in the following ways:
• You had to postpone your stock program due to severe drought conditions
• These drought conditions caused an increase in feral animal attacks and an increase in the amount of additional feed required to maintain your stock.
You are now continuing to build and purchase stock.
You intend to be able to meet the assessable income test from your business activity in the 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)