Why it’s sometimes worthwhile taking on the taxman
Where ‘special circumstances’ exist, taxpayers can get relief from the ‘non-commercial loss’ provisions in the income tax law.
Effectively, what this ‘relief’ means, is that a taxpayer can claim losses, (often) incurred in farming, in the year they are made, rather than having to wait until the venture turns a profit.
For the 2010 to 2014 income years, the taxpayer applied to the Commissioner for relief from the ‘non-commercial loss’ provisions.
The ATO refused to accept that ‘special circumstances’ existed, even though:
- the taxpayer’s olive grove: was in a region that was drought declared for much of the time and it was plagued by the Olive Lace bug from 2000 onwards; and
- in late 2009, his wife, who had project management skills, an agribusiness education and extensive experience as an oil maker and blender, underwent major surgery and was only expected to be back working at 100% by 2014.
Strangely, the AAT Member was not too complimentary to the tax officers who decided that none of these circumstances were ‘special’. In fact, he found that they had taken a “regrettably inattentive approach”.
Importantly, he found that drought and the pest infestation were special circumstances.
As to the taxpayer’s wife, he found that as she was a highly qualified member of the team and an experienced oil maker and blender, her illness constituted a special circumstance.
On balance, the AAT Member decided the taxpayer should be granted the relief from the non-commercial loss provisions for the 2010 to 2013 income years, but not the 2014 income year, when the taxpayer’s wife was finally expected to be back full-time.