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Offsetting current year business losses

Sole traders or individual partners in a partnership may be able to claim business losses by offsetting them.

Last updated 10 August 2020

If you're a sole trader or an individual partner in a partnership, and you meet at least one of the non-commercial losses requirements, you can offset your business losses against other assessable income (such as salary or investment income) in the same income year.

The non-commercial business loss requirements are:

  • your business is a primary production business or a professional arts business and you make less than $40,000 from other sources (excluding net capital gains) in an income year
  • your individual income is less than $250,000 (disregarding any assessable amount that you may have released through the First Home Super Saver Scheme) and either
    • your assessable business income is at least $20,000 in the income year
    • your business has produced a profit in three out of the past five years (including the current year)
    • your business uses, or has an interest in, real property worth at least $500,000, and that property is used on a continuing basis in a business activity (this excludes your private residence and adjacent land)
    • your business uses certain other assets (excluding motor vehicles) worth at least $100,000 on a continuing basis.
  • you have been granted a Commissioner's discretion allowing you to offset the loss.

When calculating a business loss for the current year, make sure you have accurately calculated the expenses you have incurred before you confirm a loss. Check that:

  • your expenses are related to your business activity
  • you have correctly apportioned your expenses between business and private use
  • you haven't claimed any private expenses
  • you have correctly claimed your expenses and haven't accidentally overstated them.

If you don't meet any of the non-commercial business loss requirements, you can defer the loss or carry it forward to future years.

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