Non-commercial losses

Commissioner's discretion to allow a loss

If you don't meet the income requirement or business tests, there are some circumstances where you can ask us to exercise a discretion to allow you to claim the loss.

Deferring a non-commercial loss

If there is no way to offset the loss, you defer the loss and may be able to claim it in a future year, either by passing one of the tests or making a profit in the business.

Example of deferring and claiming losses

This detailed example shows how, over five years, a person with business and employment income defers and claims business losses.

Exceptions for artists, primary producers and tax break deductions

There are exceptions to the non-commercial loss rules for primary producers, professional arts business and, for the 2009-10 and 2010-11 income years, losses solely as a result of purchases made under the business tax break concessions.

Income requirement and business tests

You can offset a loss from your business against your other income if you meet the income requirement - broadly, that your income is less than $250,000 - and your business passes one of four business tests.

Commissioner's discretion to allow a loss

If you don't meet the income requirement or business tests, there are some circumstances where you can ask us to exercise a discretion to allow you to claim the loss.

Deferring a non-commercial loss

If there is no way to offset the loss, you defer the loss and may be able to claim it in a future year, either by passing one of the tests or making a profit in the business.

Example of deferring and claiming losses

This detailed example shows how, over five years, a person with business and employment income defers and claims business losses.

Exceptions for artists, primary producers and tax break deductions

There are exceptions to the non-commercial loss rules for primary producers, professional arts business and, for the 2009-10 and 2010-11 income years, losses solely as a result of purchases made under the business tax break concessions.

Income requirement and business tests

You can offset a loss from your business against your other income if you meet the income requirement - broadly, that your income is less than $250,000 - and your business passes one of four business tests.

Non-commercial losses and product rulings

Many participants in arrangements, who are individuals, may be affected by the provisions of division 35 on the deductibility of losses from the carrying on of a business activity.

Non-commercial losses overview

Find out if you can offset a business loss against other income, and what happens to the business loss if you can't.

Non-commercial losses: assessable income test

The assessable income generated by your business activity may determine if you can offset a loss from the activity against your income from other sources. NAT 3383. Information current from 2009-10 onwards.

Non-commercial losses: Commissioner's discretion

You can offset a loss if your business activity passes one of four tests, or if we decide to exercise discretion.

Non-commercial losses: deferral of losses

If you are not able to deduct your business activity loss in the current year because of the non-commercial loss rules, you will need to defer your loss for use in a later year. Information current from 2009-10 onwards.

Non-commercial losses: evidentiary checklist

This checklist must be attached to your Application for a private ruling on the exercise of the Commissioner's discretion for non-commercial losses.

Non-commercial losses: exception for primary producers and professional arts businesses

An exception to the non-commercial loss rules allows net losses from certain primary production or professional arts business activities to be claimed in the year incurred. Information current for 2009-10 and later years.

Non-commercial losses: income requirement

You must first meet the income requirement before you can use one of the four tests to pass the non-commercial loss rules. If you subsequently pass one of the four tests, you can deduct your loss. Information current for 2009-10 and later income years.

Non-commercial losses: other assets test

The value of certain business assets may determine if you can offset a loss from a business activity against your income from other sources. NAT 3380. Information current from 2009-10 onwards.

Non-commercial losses: partnerships

If you are undertaking a business activity in partnership there are special rules to determine whether you, as an individual, pass any of the tests relating to non-commercial losses. Information current for 2009-10 and later years.

Non-commercial losses: profits test

The profitability of your business activity may determine if you can offset a loss from the activity against your income from other sources. Information current from 2009-10 onwards.

Non-commercial losses: real property test

The value of real property assets may determine whether you can deduct a loss from a business activity against your income from other sources. Information current for 2009-10 and later years.

Non-commercial losses: similar business activities

If you are carrying on more than one business activity, they can be grouped together when you need to work out if you can deduct a loss.