• 16 Deferred non-commercial business losses 2016

    This question does not apply to activities that do not constitute carrying on a business, for example, the receipt of passive investment income.

    Did you:

    • conduct a business activity as a partner in a partnership that resulted in a loss or resulted in a loss after deducting your expenses, or
    • conduct a business activity as a sole trader that resulted in a loss?

    No

    Go to question 17 Net farm management deposits or repayments, or return to main menu Individual tax return instructions

    Yes

    You cannot lodge a paper tax return.

    You must lodge your tax return using myTax or a registered tax agent.

    You need to know

    There are special rules relating to the deferral of non-commercial business losses. These rules apply to both Australian and foreign business activities.

    You can use a 2015-16 loss from a business activity you conducted either as a sole trader or in a partnership to calculate your 2015-16 taxable income only where:

    • an exception applies
    • you meet the income requirement and one of the four tests is satisfied, or
    • the Commissioner has exercised his discretion or ruled that it will be exercised to allow you to claim the loss.

    For more information about the exceptions, the income requirement, the four tests and the Commissioner's discretion, see question P9 Business loss activity details in Business and professional items 2016.

    Keep records of each of the net losses deferred for your separate business activities.

    If you are unable to claim your loss this year because of these rules, you must defer the loss.

    This deferred loss is not disallowed. Instead, you take it into account for the next income year in which you carry on this business activity or one of a similar kind.

    The deferred loss is a deduction when calculating any net profit or loss from the activity in that future year.

    Whether any overall loss can be taken into account in your calculation of taxable income for that future year will depend on the application of the non-commercial business loss deferral rules in that year.

    You must defer your loss by completing item 16 on your tax return. You will need to split the amount into primary production and non-primary production deferred losses. The amount at item 16 cannot be used to reduce your 2015-16 taxable income.

    You need to read Business and professional items 2016 before you can complete this item.

    What you may need

    • Partnerships which has information on the special rules that determine whether a business activity you carry on in partnership with others satisfies any one of the four tests.
    • Any written advice from us that the Commissioner will exercise his discretion to allow you to deduct your loss from your business activity carried on either as a sole trader or in partnership with others.

    Completing this item

    Part A

    Business and professional items schedule for individuals 2016

    Complete the Business and professional items section.

    Part B

    Deferred non-commercial business losses from partnership activities

    This part applies to you only if you carried on a business in partnership with others. Do not complete this part if you were in a partnership that did not carry on a business.

    Were you a partner in a partnership?

    No

    Go to part C.

    Yes

    Read on.

    Did you make a net loss from a business activity carried on in partnership with others in 2015–16?

    No

    Go to part C.

    Yes

    Read on.

    If you made a net loss from more than one business activity in partnership with others, you will have to answer the questions and follow the steps on this page for each of your business activities.

    Did your net loss from that business activity come within an exception described at question P9 in Business and professional items 2016?

    No

    Read on.

    Yes

    Go to part C.

    Did you meet the income requirement and your net loss from that business activity satisfied one of the four tests?

    See question P9 in Business and professional items 2016 for information about the income requirement and the four tests.

    No

    Read on.

    Yes

    Go to part C.

    Have we advised you in writing that the Commissioner will exercise his discretion to allow you to claim a net loss from that business activity for the year?

    No

    Read on.

    Yes

    Go to part C.

    Step 1

    Write the total of your net losses to be deferred from business activities you carried on in partnership with others at F item 16 on your tax return.

    Step 2

    Check that you have included the amount of your deferred non-commercial business losses in working out your net distribution at item 13 and 20 on your tax return; otherwise, you will have overstated your taxable income.

    Step 3

    Make sure that you have completed items P3 and P9 in the Business and professional items section.

    Part C

    Deferred non-commercial business losses from sole trader activities

    Did you make a net loss from a business activity as a sole trader in 2015–16?

    No

    Go to part D.

    Yes

    Read on.

    If you made a net loss from more than one business activity as a sole trader, you will have to answer the questions and follow the steps below for each of your business activities.

    Did your net loss from that business activity come within an exception described at question P9 in Business and professional items 2016?

    No

    Read on.

    Yes

    Go to part D.

    Did you meet the income requirement and your net loss from that business activity satisfied one of the four tests?

    See question P9 in Business and professional items 2016 for information about the income requirement, the tests and business tax break deductions.

    No

    Read on.

    Yes

    Go to part D.

    Have we advised you in writing that the Commissioner will exercise his discretion to allow you to claim a net loss from that business activity for the year?

    No

    Read on.

    Yes

    Go to part D.

    Step 1

    Write the total of your net losses to be deferred from business activities as a sole trader at G item 16.

    Step 2

    Check that you have included the amount of your deferred non-commercial business losses in working out your net income or loss at items 14, 15 and 20 on your tax return; otherwise, you will have overstated your taxable income.

    Step 3

    Make sure that you have completed items P3 and P9 in the Business and professional items section.

    Part D

    Total deferred non-commercial business losses

    Step 1

    Add up any amounts of primary production deferred losses at F and G item 16. Write the total of primary production deferred losses at I item 16.

    Step 2

    Add up any amounts of non-primary production deferred losses at F and G item 16. Write the total of non-primary production deferred losses at J item 16.

    Step 3

    You must record the three highest loss-making business activities (if applicable)
    at item P9 Business loss activity details in the Business and professional items section, whether or not:

    • the net loss from your business activity came within an exception
    • you met the income requirement and the net loss from your business activity satisfied one of the four tests
    • the Commissioner had advised that he will exercise his discretion to allow the net loss from your business activity to be claimed this year
    • you had carried on the business activity in a partnership or as a sole trader.

    Where to go next

      Last modified: 26 May 2016QC 48705