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Edited version of private advice
Authorisation Number: 1051964702182
Date of advice: 22 March 2022
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 financial year?
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 from making a tax profit. Consequently, the Commissioner will exercise his discretion in the 20XX financial year.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You do not satisfy the <$250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.
You carry on a primary production business through a partnership.
A prolonged drought has impacted the profitability of your business activity.
Your business was impacted in the following ways:
During the 20XX calendar year, the area experienced the lowest rainfall on record for 150 years. Your property remains officially in a drought declared shire.
Due to this drought, during the 20YY financial year you de-stocked the farm.
You have begun to re-stock the farm and it is currently only being operated at approximately X% capacity.
You have stated that if it were not for the drought, over the past XX months you would have been able to stock the farm with more animals and subsequently taken advantage of the currently high prices for those animals, and in turn made a tax profit.
You intend to return to profit in the 20ZZ 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)