Edited version of private advice

Authorisation Number: 5010078169314

Date of advice: 27 October 2021

Ruling

Subject: Commissioner's discretion - non commercial losses

Question

Will the Commissioner exercise the discretion for special circumstances under section 35-55 of the Income Tax Assessment Act 1997 to allow a loss from cattle farming activity in the calculation of your taxable income for the 20XX-XX financial year?

Answer

Yes.

The Commissioner's discretion in paragraph 35-55(1)(a) may be exercised for the income year(s) in question where the business activity is affected by special circumstances outside the control of the operators of the business activity.

The special circumstances must be outside the control of the operators of the business activity. Such circumstances are specifically defined to include drought, flood, bushfire or some other natural disaster.

Having regard to your full circumstances, it is accepted that special circumstances outside your control have prevented cattle farming activity from making a tax profit. You will be able to offset the loss from this activity against your other income.

This ruling applies for the following:

XXXX to 30 June XXXX

Relevant facts and circumstances

You currently operate a primary production farming operation.

Your business activities were severely affected from the extended drought and then by horrific bushfires. The pasture was already struggling from the lack of rain and was then scorched by a very hot fire, you lost cattle in the fires and fences were destroyed.

You made a considerable investment in large plant and equipment to ensure the viability of the farming business, including tractors, dozers, an excavator and spray units.

You have completed TAFE qualifications, to give yourself the tools to be able to manage the risks associated with primary production farming.

Your produce is sold to individuals, companies and corporations.

You intend to drought / fireproof the properties through fencing repairs and bushfire hazard reduction, introduce technology to monitor activities and improve soil health to optimise production.

You did not commence a new business activity in the financial year ended XXXX or within the last five years.

Assets are shared amongst the mixed farming activities.

Your income for non-commercial loss purposes in the income year prior to the income year for this application was received by the Commissioner was greater than $XXX.

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)