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Edited version of private advice
Authorisation Number: 1052090580642
Date of advice: 6 March 2023
Ruling
Subject: Commissioner's discretion - non-commercial losses - special circumstances
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 the calculation of your taxable income for the income year ended 30 June 20XX?
Answer
Yes.
Having regard to your full circumstances, it is accepted that your business activity was affected by special circumstances outside your control, and these prevented you from meeting one of the four tests. Consequently, the Commissioner will exercise his discretion in the 20XX income year.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You operate the business as a partnership.
You commenced your XXXXX business in State of XXX in 20XX-XX financial year.
You made a tax loss from your XXXXX business for 20XX-XX financial year.
You did not satisfy the under $40,000 assessable income from other sources that do not relate to your professional arts business, set out in subsection 35-10(4) of the ITAA 1997
You satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the Income Tax Assessment Act 1997 (ITAA 1997).
You did not satisfy one of the four tests set out in sub-paragraph 35-55(1)(b)(1) of the ITAA 1997.
Due to X placing a ban on Australian XXX, your ability to export your XXX to X ceased.
You were not able to sell your XXXX during harvest as your XXXX were not under contract with any XXXX.
You were unable to operate your XXX crop business since it was no longer viable for business.
You had to redevelop the property for a more viable XXXX crop.
You expect your business activity to meet the assessable income test in the year ending 30 June 20XX and produce approximately $XX,XXX in assessable income.
You expect to make your first profit in the year ending 30 June 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 35-10
Income Tax Assessment Act 1997 Section 35-55