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Edited version of private advice
Authorisation Number: 1051952905235
Date of advice: 22 February 2022
Ruling
Subject: Non-commercial losses - discretion
Question
Will the Commissioner exercise the discretion in section 35-55 of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you to include any losses from your primary production business activity in your calculation of taxable income for the stated income years?
Answer
Yes. Having regard to your full circumstances it is accepted that the high rainfall that damaged your produce was outside of your control and prevented you from making a tax profit.
This ruling applies for the following periods:
Period End 30 June 20XX
Period End 30 June 20XX
Period End 30 June 20XX
Period End 30 June 20XX
The scheme commences on:
XX January 20XX
Relevant facts and circumstances
You do not satisfy the under $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.
You carry on a primary production business activity as a partnership. The business is primarily concerned with the cultivation of a product.
You commenced business operations in the specified income year.
In 20XX you projected that you would start to make a tax profit in the 20XX income year.
You were ahead of your projection until you were impacted by high rain fall which resulted in severely lowering the soil PH levels. You are now in the process of rectifying the soil PH levels.
You intend to make a tax profit in the 20XX income year.
You have based the projected figures on a wholesale price of a specified amount per kg. The decrease in the sale price per kg is due to the grade of the product supplied.
You provided us with your projected income figures.
You provided us with a profit and loss projection statement that shows a tax profit should be made from the 20XX income year onwards.
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)(c)