• Non-commercial losses: real property test

    If you have a net loss from a business activity you carry on as an individual, either as a sole trader or in a partnership, the non-commercial loss rules will apply. These rules determine whether you can use your business loss to offset income from other sources.

    Further Information

    For information on non-commercial losses generally, refer to Guide to non-commercial losses.

    End of further information

    Before you apply the real property test

    For the 2009-10 and later income years, you first need to meet the non-commercial losses income requirement before you can use the real property test.

    You meet the income requirement if the total of the following amounts is less than $250,000:

    • taxable income (ignoring any business losses)
    • total reportable fringe benefits
    • reportable superannuation contributions
    • total net investment losses.
    Further Information

    For more information about the income requirement, see: Non-commercial losses - income requirement.

    End of further information

    If you meet the income requirement, you can use the real property test.

    Real property test

    You will pass the real property test if real property of at least $500,000 in value is used in the business activity on a continuing basis.

    Real property includes:

    • land
    • structures, such as buildings, fixed to the land
    • interests in that property, such as a lease of that property.

    Real property, for the purposes of this test, does not include:

    • a dwelling and adjacent land that is used mainly for private purposes, or
    • fixtures owned by you as a tenant.
    Further Information

    For more information on what constitutes a dwelling see Guide to capital gains tax.

    End of further information

    If you pass the real property test, you can claim your losses for the relevant year.

    Further Information

    For general information, refer to Guide to non-commercial losses.

    End of further information
      Last modified: 11 Aug 2011QC 16245