What is a tax loss?

You generally make a tax loss when the total deductions you can claim for an income year exceed the total of your assessable and net exempt income for the year.

Deductions that do not give rise to a loss

Certain deductions that would otherwise be allowable cannot be claimed as deductions where they would give rise to a tax loss. They are:

  • payments of pensions, gratuities or retirement allowances to employees, former employees, or their dependents
  • gifts or contributions made to deductible gift recipients
  • payments made under conservation covenants
  • personal superannuation contributions.

Tax loss or capital loss?

A tax loss is different from a capital loss.

A capital loss occurs when you dispose of a capital asset for less than its tax value. A capital loss can only be offset against any capital gains in the same income year or carried forward to offset against future capital gains – it cannot be offset against income.

Australian and foreign residents

Australian residents now calculate an overall tax loss on the basis of their worldwide income and deductions. Foreign residents calculate a tax loss on the basis of their Australian income and deductions incurred in earning that income.

See also:

Non-commercial losses

Last modified: 28 May 2015QC 23593