Edited version of private advice

Authorisation Number: 1051969895968

Date of advice: 6 April 2022

Ruling

Subject: Commissioner discretion - special circumstances

Question

Will the Commissioner exercise the discretion in paragraph 35-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA1997) 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 XXXX financial year.

This ruling applies for the following period:

XXXX

The scheme commences on:

XXXX

Relevant facts and circumstances

Your income for non-commercial loss purposes is less than $250,000.

You operate a Sole Trader business trading as XXXX. The majority of the business's earnings being derived from repairs to primary production equipment and machinery, as well as other agricultural support machinery such as harvesting equipment.

Your business commenced in XXXX; you provided your first invoice dated XXXX for XXXX.

A loss in business earnings has been caused by:

•       Your regional area experienced severe drought from XXXX to approximately XXXX. The continued drought resulted in failed crops for the upcoming season, therefore work was ceased on agricultural machinery.

•       During XXXX, COVID lockdown restrictions prevented work in local properties as you were classified as a non-essential worker and you were unable to travel to other towns to obtain work.

•       You were unable to get vaccinated for COVID until XXXX, due to the Governments age restrictions and availability. Your work involves face to face contact with clients.

•       Freight times for parts, ordering stock and tools necessary for the jobs, were all adversely affected.

•       Work was limited as you couldn't afford to hold credit accounts with suppliers with long wait times without payment from customers.

•       During XXXX, your regional area experienced bushfires and severe heat days.

•       At the start of XXXX, severe rain resulted in earthmoving clients being flooded out, stopping work and delaying repairs to the machinery. As a result, customers ceased work on machinery, and due to cashflow many undertook repairs on their own equipment.

•       During Month XXXX, flooding then destroyed many low-lying crops resulting in further loss of business. Certain agreed jobs had to be cancelled due to clients' properties being flooded and access was unattainable.

•       For the XXXX financial year, you started making a profit, with projected sales to year end of XXXX.

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 subsection 35-30

•       Income Tax Assessment Act 1997 paragraph 35-55(1)(b)