Non-commercial losses and product rulings

Non-commercial losses

As an individual participating in arrangement covered by an existing product ruling you may be affected by the non-commercial loss rules concerning whether you can deduct your business losses.

For general information on the operation of non-commercial losses go to:

You can only claim your business loss under the non-commercial loss rules if:

  • you meet the income requirement in subsection 35-10(2E) and one of the four tests is satisfied (profits, assessable income, other assets, real property)
  • the loss is solely due to a deduction claimed under the small business and general business tax break
  • one of the exceptions for primary production or professional arts businesses apply (subsection 35-10(4)), or
  • the Commissioner has exercised his discretion to allow you to claim the loss.

Exercising the Commissioner's discretion

The Commissioner will only exercise his discretion in limited circumstances. Broadly, these are where:

  • there are special circumstances outside your control that have prevented you passing one of the four tests (35-55(1)(a)), or
  • because of the nature of the business, there is a lead time before your business can pass one of the four tests or make a profit.

Lead time

If you are an individual, the Commissioner can exercise his discretion in limited circumstances for you to offset your business activity loss against other income if:



The fact that an arrangement is covered by an existing product ruling does not automatically mean that the discretion in section 35-55 will be exercised favourably in respect of the individual participants in that arrangement.

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    Last modified: 03 Nov 2010QC 16137