Multiple business activities
If you are running more than one business activity and they are similar, they can be grouped together to establish whether you can deduct a loss.
When are two business activities similar?
To decide whether business activities are similar, you could consider:
- the assets they use
- the nature of their operations
- their location
- their funding basis
- the goods and/or services provided
- the economics of the market for those goods and services
- any links between the activities of the two businesses
- the time spent on these activities
- the nature of expenses involved in each business activity
- applicable laws or regulations
- any relevant professional associations.
For example, the following activities may be similar:
- grazing sheep and grazing cattle
- growing grapes and growing olives
- manufacturing shirts and manufacturing jeans.
In contrast, the following business activities may not be similar:
- manufacturing goods and farming
- repairing cars and making furniture.
What if businesses are not similar?
If you are running two business activities that are not similar, they must independently pass a test for deducting a loss. This may mean, for example, that you can claim a tax deduction for a loss on one business activity but not for another.
If you are carrying on more than one business activity and they are similar, they can be grouped together to establish whether you can deduct a loss.
Find out more
Paragraphs 49 to 54 of Taxation Ruling TR 2001/14External Link Income tax: Division 35 - non-commercial business losses provide more details on when business activities are considered to be 'of a similar kind'. Refer also to Example 2, paragraphs 124 to 130 of that ruling.
End of example