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Edited version of private advice
Authorisation Number: 1052076433117
Date of advice: 17 January 2023
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 year ended 30 June 20XX?
Answer
Yes.
Having considered your circumstances and the relevant factors the Commissioner will exercise his discretion to allow you to include any losses from your business activity in the calculation of your taxable income for the year ended 30 June 20XX. It is accepted that there is a 'special circumstance' outside of your control that prevented you from meeting the non-commercial losses test. Based on your historical business income and but for the special circumstance had you operated for a whole income year we estimate you would have satisfied 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:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You operated a tobacco retailing business located at a train station.
Beginning in the 2020 income year your business was affected by lockdowns which were a direct result of the COVID-19 virus.
You experienced a sharp drop in foot traffic and was forced close the store sporadically to comply with lockdown orders.
As a result of this your business saw a drop in income and you closed the business during the month of August 20XX.
You provided the income figures for the last 5 income years.
You provided financial statements for the 20XX, 20XX and 20XX income years.
In 20XX you suffered a loss.
Your losses were largely due to the following expenses:
• You wrote off a large amount of stock as much of it had expired or was outdated products due to the lockdown periods and could not be returned to suppliers
• You had to pay for repairs to bring the store back to its original condition
• You had bills for rent, telephone, and electricity during the month of July 2021
You satisfy the less than $250,000 income requirement as set out in subsection 35-10(2E) of the ITAA 1997 in the 2022 income 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 subsection 35-30
Income Tax Assessment Act 1997 subsection 35-55(1)(a)