Edited version of private advice

Authorisation Number: 1052226739580

Date of advice: 28 February 2024

Ruling

Subject: Commissioner's discretion granted - 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 your calculation of taxable income for the 2022-23 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 meeting one of the four tests. Had it not been for the special circumstances you would have met the assessable income test. Consequently, the Commissioner will exercise his discretion in the 2022-23 financial year.

This private ruling applies for the following period:

1 July 2022 to 30 June 2023

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

You satisfy the less than $250,000 income requirement set out in subsection 35-10(2E) of the ITAA 1997.

You carry on a retail business, supplying a regional area's local businesses and markets. You pack and ship the items for your clients.

In the 20YY-YY financial year, you commenced your business operations. Before the onset of COVID-19, you had employed casual staff. However, the pandemic's restrictions significantly affected your business. Small business clients were unable to keep their doors open, and markets were cancelled.

During the 20YY-YY financial year, the loss of family members affected your business activities.

Your business was impacted in the following ways:

•                    you were unable to allocate additional effort to your business beyond fulfilling pre-booked market commitments using existing stock

•                    limited time investment resulted in a shortage of stock, significantly impacting your potential market sales.

•                    during the 20YY-YY financial year, you were unable to pursue any wholesale contracts due to your limited availability. Your absence from actively designing, commissioning, manufacturing, storing, packaging, and shipping goods during that period impacted your ability to engage in wholesale business transactions.

Your business has previously met the assessable income test in the last four financial years prior to the year being considered.

In the 20YY-YY financial year, you reported an income of a certain amount. However, you incurred a loss from your business activity during that period. Additionally, you were employed and experienced changes in your employment status throughout the year.

In the 20YY-YY financial year, you expect your business activity will meet the assessable income test.

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)