Guide to tax losses

How individuals utilise losses

Individuals, both those in business (sole traders and partners) and those not in business, can generally carry forward a tax loss indefinitely, but must utilise a tax loss at the first opportunity.

That is, if your income in the current income year exceeds your current year's deductions, you must offset any losses you have carried forward from previous years against your current year's income. You cannot choose to hold onto losses to offset them against future income if they can be offset against the current year's income.

(If in your return for a particular year you failed to utilise a loss when you were entitled to do so, you can later request an amendment for that year.)

However, in some circumstances, individuals must treat losses from business activities separately from income and deductions from non-business activities (such as salary and wages and investments) - see Limits on offsetting losses from business activities against non-business income.

Carried-forward losses are offset first against any net exempt income and only then against assessable income. Losses must be utilised in the order in which they were incurred.

Subject to the requirement to utilise losses at the first opportunity, tax losses can be carried forward indefinitely except for:

• non-primary production losses incurred before the 1989-90 income year, which are extinguished and can no longer be utilised
• foreign losses incurred before the 1999-2001 income year, which are extinguished and can no longer be utilised. There are restrictions on the utilisation of foreign losses incurred before 1 July 2008 (see Foreign losses).

	For information on how to calculate a loss for the purpose of completing your tax return, refer to Tax losses of earlier income years.
	If you have been bankrupt, you generally cannot utilise in later years the tax losses that you incurred before you became bankrupt. This rule also applies if you were released from the debts by the operation of an Act relating to bankruptcy.
	Losses - home

Sections within How individuals utilise losses

• Partnerships
• Limits on offsetting losses from business activities against non-business income