Business loss activity details – P9

Loss activities

Do you have either:

• a loss from a business activity you carried on either as a sole trader or in partnership (including a loss after deducting your partner expenses)
• a loss at
  • question 13 Partnerships and trusts – label N or O
  • question 14 Personal services income – label A
  • question 15 Net income or loss from business – label B or C
• a foreign business loss at question 20 Other net foreign source income – label M?

If you answer:

• No – If you're a small business entity using the simplified depreciation rules, go to P10 Small business entity simplified depreciation.
• Yes – Read on.

You must complete Activity 1. If you have more than one loss, then each loss must be considered separately.

Before you complete question 16 in your supplementary tax return, include foreign business losses shown in question 20 – label M here. If you carry on an activity that is partly in Australia and partly overseas, you must consider if you have an overall loss from the activity before completing this item. Combine the results of the activity that is carried on partly in Australia and overseas to determine if you have an overall loss for the activity.

While this item is about business losses, you may have to report an investment loss or a business profit if you answer Yes.

For more information, see:

• Non-commercial losses
• Taxation Ruling TR 2001/14 Income tax: Division 35 – non-commercial business losses.

What you need

If you're a partner in a partnership, you'll need the following details for each business activity that you, as a partner, are involved in:

• the amount of assessable income earned by the partnership for the activity
• the share of the partnership's assessable income, real property and certain other assets, attributable to partners who aren't individuals
• your share of income or loss of the partnership from the activity.

Investment losses

If you have a partnership non-primary production loss from a passive investment at question 13 – label O – for example, from a rental property – then you're not required to report that loss. If, however, that is your only loss, you need to complete Activity 1 at P9 Business loss activity details and show:

• the description of the activity at label D as 'Investment'
• the industry code '67110' at label E
• P for partnership at label F
• 0 for type of loss at label G
• 0 for net loss at label I.

If you have completed Activity 1 as directed above and are a small business using the simplified depreciation rules, go to P10 Small business entity simplified depreciation.

If you haven't completed Activity 1 as directed above, read on.

Work out whether you have a loss for the business activity

Complete Worksheet 1 for each business activity to determine whether you have an overall loss for that activity when both of the following apply:

• you have a loss from a business activity at any of
  • question 13 – label N or O
  • question 14 – label A
  • question 15 – label B or C
  • question 20 – label M
• you have any of the following from the same business activity
  • gross interest at question 10 – label L (interest on a farm management deposit (FMD) isn't business income)
  • dividends at question 11 – labels S, T or U
  • farm management repayments at question 17 – labels N or R
  • net capital gain at question 18 – label A
  • net foreign source income or loss at question 20 – label M
  • partner deductions attributable to that business activity at question 13 – labels I, J, X or Y.

Complete Worksheet 1

• Add up the income from the activity shown at questions 10, 11, 17, 18 and 20 and write the result at row a.
• Write at row b the loss from this activity reported at questions 13, 14 or 15.
• If the activity is carried on in partnership, write at row c any partner deductions that relate to this activity which you showed at question 13 – label I, J, X or Y.
• Write at row d any net foreign loss from this activity you showed at question 20 – label M.
• Add up rows b, c and d and write the result at row e.
• Subtract the amount at row e from row a and write the result at row f.
• If the result at row f is negative this activity has an overall loss, see You need to know.
• If the result at row f is zero or positive this activity doesn't have a loss, see Profitable activities.

Worksheet 1 – Work out business loss activity

To help you work out whether you have a loss for the business activity, you can use this worksheet. If you use it, keep the completed worksheet with your other records.

Worksheet 1 – Work out business loss activity.

Row	Calculation element	Amount
a	Income from the activity shown at other questions: gross interest question 10 – label L dividends question 11 – label S, T, U farm management repayments question 17 – label N, R net capital gain question 18 – label A other net foreign source income question 20 – label M.	$
b	Loss from the activity shown at: distribution from partnerships question 13 – labels N, O net personal services income question 14 – label A net income or loss from business question 15 – labels C, B Show the loss here as a positive amount.	$
c	Partner deductions attributable to the activity shown at question 13 – labels I, J, X, Y.	$
d	Loss from the activity at question 20 – label M Show the loss here as a positive amount.	$
e	Add rows b, c and d.	$
f	Subtract row e from a. The result at row f is your business activity's overall profit or loss.	$

Profitable activities

If the amount at row f in Worksheet 1 is zero or positive and you either:

• have more than one business activity net loss to report at P9, then you need to report all of them (there is space for the 3 largest losses on the paper return)
• don't have a net loss from another business activity then you need to complete Activity 1 as follows in respect of one profitable business activity.

Write:

• the description of activity at label D
• the industry code at label E
• P for partnership or S for sole trader at label F
• 5 for type of loss at label G
• AN as reference for code 5 at label C
• 200926 for number at label A
• 0 for net loss at label I.

If you have completed Activity 1 as directed above and are a small business using the simplified depreciation rules, go to P10 Small business entity simplified depreciation.

If you have not completed Activity 1 as directed above, note the activity loss amount at row f in Worksheet 1 and read on.

Non-commercial losses

Under the rules for non-commercial business losses (NCL), you can use a 2024–25 loss from a business activity you conduct either as a sole trader or in partnership to calculate your 2024–25 taxable income if it meets one of these conditions:

• an exception applies
• you meet the income requirement and one of the 4 tests is satisfied
• you meet the income requirement and don't satisfy any of the 4 tests, but the Commissioner of Taxation has exercised his discretion or ruled that it will be exercised, to allow you to claim the loss without deferral
• you don't meet the income requirement and don't satisfy any of the 4 tests, but the Commissioner has exercised his discretion, or ruled that it will be exercised, to allow you to claim the loss without deferral.

You can't claim losses arising from activities you conduct that are private recreational pursuits or hobbies or if there is no likelihood of profit.

The rules for non-commercial business losses apply to both foreign and Australian business activities.

Safe harbour

If you have made a non-commercial loss from a business activity because your business was affected by bushfire, flood or a government-imposed lockdown, business closure or restrictions due to COVID-19, you can consider using the safe harbour.

You qualify for the safe harbour if you satisfy all of the criteria of the Practical Compliance Guideline PCG 2022/1 Non-commercial business losses – Commissioner's discretion regarding flood, bushfire or COVID-19 as a sole trader, or as a partner in a partnership.

If the safe harbour applies, you can offset the loss (but not a past year's deferred loss) against other income in the relevant income year. You also won't need to seek a private ruling on whether the Commissioner would exercise his discretion to allow that loss to be offset.

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

Exceptions

If you operated or proposed to operate a primary production business or a professional arts business and your unrelated assessable income for 2024–25 (except any net capital gain) from other sources is less than $40,000, you may claim your business loss for 2024–25.

A professional arts business is a business you carry on as an author of a literary, dramatic, musical or artistic work, as a performing artist, or as a production associate.

GST excluded

Your assessable income excludes any goods and services tax (GST) on a taxable supply you make. You must be registered or required to be registered for GST to make a taxable supply.

Meeting one of the 4 tests

You'll not have to defer your loss from your business activity if you meet the income requirement and the activity satisfies at least one of the following 4 tests:

• You earn at least $20,000 of assessable income from the business activity for 2024–25.
• Your business activity produces a profit for tax purposes in 3 out of the past 5 years, including 2024–25.
• The value of real property assets (excluding any private dwelling) used on a continuing basis in carrying on the business activity is worth at least $500,000.
• The value of certain other assets (except cars, motorcycles and similar vehicles) used on a continuing basis in carrying on your business activity is at least $100,000.

For more information, see Taxation Ruling TR 2001/14 Income tax: Division 35 – non-commercial business losses.

Income requirement

You must meet the income requirement to continue to access the 4 tests to offset your loss from a business activity against other assessable income.

You'll meet the income requirement and have access to the 4 tests if the total of the following amounts is less than $250,000:

• Taxable income is the amount shown, or that would be shown, on page 4 of your tax return if the loss from this activity at row f in Worksheet 1 is claimed and not added back at question 16 less any assessable first home super saver (FHSS) amount. If you have an FMD repayment in relation to the loss activity, include it in calculating the loss from the activity. If your taxable income is zero or a loss, and the loss from this activity is $250,000 or more, you need to complete Worksheet 2a or 2b. You need to complete Worksheet 2a or 2b for each activity with a loss of $250,000 or more:
• Total reportable fringe benefits amounts shown on your payment summary and totalled at question IT1 – label N and W in your tax return.
• Reportable super contributions are your reportable employer super contributions (shown on your payment summary and totalled at question IT2 – label T in your tax return), plus any deductible personal super contributions shown at question D12 in your supplementary tax return.
• Net investment losses are the total of your financial investment losses (shown at question IT5 – label X in your tax return) and rental properties losses (shown at question IT6 – label Y in your tax return).

If you don't meet the income requirement, you'll have to defer your loss unless the Commissioner has exercised his discretion or ruled that it will be exercised, or another exception applies.

Depending on your circumstances, there are 2 different calculations to help you work out your income:

• If you made a loss in a previous income year, go to option 1.
• If this is your first year in business, or you have not made a loss in a previous income year, go to option 2.

Option 1 - Prior year loss

Use worksheet 2a to help calculate:

• your income for the income requirement where you had a prior year loss
• if you've passed the profits test.

To complete worksheet 2a, follow the instructions below:

Worksheet 2a: Calculating your income for NCL purposes with a prior year loss

Row	Calculation element	Amount
a	Your taxable income Your taxable income is your assessable income less your allowable deductions for an income year. For the purposes of the income requirement, any assessable FHSS scheme released amount and any losses from the business activity are ignored. That is, any: business losses are added back to your taxable income, if they are already included in the calculation of your taxable income assessable FHSS released amount is subtracted from your taxable income, if it is already included in the calculation of your taxable income. If your taxable income is a loss after adding back the business losses and subtracting the FHSS amount, use zero for this part of the calculation.	$
b	Your total reportable fringe benefits This is shown at question IT1 – label N and W. Your total reportable fringe benefits are shown on your income statements or payment summaries. If the total amount is less than the reportable fringe benefits threshold of $2000, it won't be shown on your income statement or payment summary and wouldn't form part of the calculation. If the amount is below the $2000 threshold, use zero for this part of the calculation.	$
c	Reportable super contributions Reportable super contributions include your: reportable employer super contributions personal deductible contributions. This is shown at shown at question IT2 – label T. Reportable employer super contributions Reportable employer super contributions are salary sacrificed super contributions or other contributions your employer makes to a super fund on your behalf where: you influence the amount or rate of super your employer contributes the contributions are additional to the minimum contributions they must make under super guarantee law an industrial agreement the trust deed or governing rules of a super fund a federal, state or territory law. If your employer makes reportable employer super contributions for your benefit, they must include the total amount of these contributions on your income statement or payment summary for the relevant income year. You must then include this amount in your tax return. Check with your employer for details of your salary sacrificed super contributions. Personal deductible contributions Your personal deductible contributions include any personal contributions you make to a super fund that you can claim a deduction for in your individual tax return. If you make a personal contribution and you don't claim a deduction for it, that amount isn't a reportable super contribution. Add your reportable employer super and personal deductible contributions together and use the value for this part of the calculation.	$
d	Net investment loss This is shown at question IT5 – label X and question IT6 – label Y in your tax return. You'll have a total net investment loss when the amount of allowable deductions you claim for your financial investments and rental properties is more than the gross income you receive from those investments. It doesn't matter whether the investment is overseas or in Australia. Your total net investment loss is the sum of your net investment losses from the following 2 types of investments: rental property investments, such as negatively geared rental properties financial investments, such as negatively geared share portfolios. When working out your net investment losses, you can't use net income from either your: rental property investment to offset a loss from your financial investment financial investment to offset a loss on your rental property investment.	$
e	Add rows a, b, c and d. This is value e	$
f	Previous year carried forward Non-commercial Losses This is shown at question L1 – label Q and R, but not claimed at question L1 – label F and Z. If you have any deferred losses from your business activity from the previous income year, include them at row f in the calculation.	$
g	Subtract f from e. This is your income for non-commercial losses (NCL) purposes.	$

 

Option 2 - First year in business or no prior year loss

Use worksheet 2b to help you calculate your income for the income requirement where this is your first year in business or if you don't have any prior year losses.

Worksheet 2b: Calculating your income for NCL purposes in first year of business or without prior year losses

Row	Calculation element	Amount
a	Your taxable income Your taxable income is your assessable income less your allowable deductions for an income year. For the purposes of the income requirement, any assessable FHSS scheme released amount and any losses from the business activity are ignored. That is, any: business losses are added back to your taxable income, if they are already included in the calculation of your taxable income assessable FHSS released amount is subtracted from your taxable income, if it is already included in the calculation of your taxable income. If your taxable income is a loss after adding back the business losses and subtracting the FHSS amount, use zero for this part of the calculation.	$
b	Your total reportable fringe benefits This is shown at question IT1 – label N and W. Your total reportable fringe benefits are shown on your payment summaries. If the total amount is less than the reportable fringe benefits threshold of $2000, it won't be shown on your income statement or payment summary and wouldn't form part of the calculation. If the amount is below the $2000 threshold, use zero for this part of the calculation.	$
c	Reportable super contributions Reportable super contributions include your: reportable employer super contributions personal deductible contributions. This is shown at question IT2 – label T. Reportable employer super contributions Reportable employer super contributions are salary sacrificed super contributions or other contributions your employer makes to a super fund on your behalf where: you influence the amount or rate of super your employer contributes the contributions are additional to the minimum contributions they must make under: super guarantee law an industrial agreement the trust deed or governing rules of a super fund a federal, state or territory law. If your employer makes reportable employer super contributions for your benefit, they must include the total amount of these contributions on your income statement or payment summary for the relevant income year. You must then include this amount in your tax return. Check with your employer for details of your salary sacrificed super contributions. Personal deductible contributions Your personal deductible contributions include any personal contributions you make to a super fund that you can claim a deduction for in your individual tax return. If you make a personal contribution and you don't claim a deduction for it, that amount isn't a reportable super contribution. Add your reportable employer super and personal deductible contributions together and use the value for this part of the calculation.	$
d	Net investment loss This is shown at question IT5 – label X and question IT6 – label Y in your tax return. You'll have a total net investment loss when the amount of allowable deductions you claim for your financial investments and rental properties is more than the gross income you receive from those investments. It doesn't matter whether the investment is overseas or in Australia. Your total net investment loss is the sum of your net investment losses from the following 2 types of investments: rental property investments, such as negatively geared rental properties financial investments, such as negatively geared share portfolios. When working out your net investment losses, you can't use net income from your: rental property investment to offset a loss from your financial investment financial investment to offset a loss on your rental property investment.	$
e	Add rows a, b, c and d. This is your income for NCL Purposes	$

The Commissioner’s discretion

If you meet the income requirement for the most recent income year ending before you request that the discretion is exercised, the Commissioner can exercise his discretion to allow a loss from a business activity to be claimed in the year it arises. This can occur even if none of the 4 tests are satisfied, provided either:

• the business activity is affected by special circumstances outside of your control (for example, natural disasters) where the activity would have satisfied one of the 4 tests but for these special circumstances
• the business activity, because of its nature, has a lead time and consequently, you don't or won't satisfy any of the 4 tests – however, there is an objective expectation that within a period that is commercially viable for the industry either
  • you will satisfy one of the 4 tests
  • produce a profit for tax purposes for that year (‘Commercial viability’ is measured against independent industry standards).

If you exceed the income requirement for the most recent income year ending before you request that the discretion is exercised, the Commissioner can exercise his discretion to allow a loss from a business activity in more limited circumstances. The Commissioner can exercise his discretion in this instance if either:

• the business activity is affected by special circumstances outside of your control (for example, natural disasters) where the activity is unable to produce a tax profit and would have satisfied one of the 4 tests but for these special circumstances
• the business activity, because of its nature, has a lead time and, for this reason, doesn't or won't produce assessable income greater than the tax deduction attributable to that income. However, there is an objective expectation that it'll do so within a period that is commercially viable for the industry concerned (‘Commercial viability’ is measured against independent industry standards)
• your business activity has been affected by bushfire, flood or a government-imposed lockdown, business closure or restrictions due to COVID-19, you can consider using the safe harbour.
• your circumstances don't fall within the terms of the safe harbour, you can still apply for an exercise of the Commissioner's discretion in the usual way.

Applying for the Commissioner’s discretion

You must apply in writing for advice on whether the Commissioner will exercise discretion. To do this, complete the Application for a private ruling on the Commissioner’s discretion for non-commercial business losses. However, if you qualify for the safe harbour, there is no need to apply for the Commissioner's discretion.

Deferring your loss

If you're unable to claim your loss in 2024–25 because of these rules, you must defer the loss.

This deferred loss isn't disallowed. Instead, you take it into account for the next income year in which you carry on this business activity, or similar business activity.

The deferred loss is a deduction when calculating any net profit or loss from the activity in that future income year. Your deferred loss deduction may be reduced if you either:

• earn net exempt income in the future income year
• become bankrupt or are released from any debts by the operation of an Act relating to bankruptcy.

Whether any overall loss can be taken into account when you calculate taxable income for that future income year depends on the application of the deferral rules for non-commercial business losses in that income year.

If you're unable to claim your loss against other income in 2024–25 because of these rules, you must defer your loss by showing the amount at question 16 in your supplementary tax return. The amount shown at question 16 can't be used to reduce your 2024–25 taxable income.

Make sure you complete Activity 1, and if necessary, Activity 2 and Activity 3 at P9 in your schedule before you complete question 16 in your supplementary tax return.

Completing the activities

If you have more than one loss activity to report, list your activities from the largest loss to the smallest loss and complete the activities in that order. Only the first 3 activities are to be reported.

If you aren't required to complete Worksheet 2a or 2b go to Activity 1. Otherwise, each activity needs to be completed as follows:

• the description of activity at label D
• the industry code at label E
• P for partnership or S for sole trader at label F
• 5 for type of loss at label G
• AN as reference for code 5 at label C
• 200926 for number at label A
• your net loss amount at label I.

Activity 1

Follow the instructions below to complete the steps for activity 1.

Description of activity

Describe the business activity from which you make the largest loss and enter this at P9 – label D in your schedule. If your business activity is the result of an investment in a tax-effective arrangement, enter the name of the project at label D.

Industry code

Write the appropriate industry code for the business activity.

Code the business activity as accurately as possible. The industry code is made up of 5 digits – for example, if the industry is dairy cattle farming, the code you write in the tax return is 01600.

An incorrect code may result in you not receiving a necessary service or material from us, or could lead us to incorrectly target audits. Tax statistics use the industry code you provide to publish industry benchmarks.

The industry codes we use are a modified version of the Australian and New Zealand Standard Industrial Classification (ANZSIC)External Link produced jointly by the Australian Bureau of Statistics (ABS) and Statistics New Zealand. Use our Business industry code (BIC) tool to help you find the correct BIC for your business activity.

Partnership or sole trader

At P9 – label F, enter either P in the box at Partnership (loss from a business activity carried on in partnership with others) or S in the box at Sole trader (loss from a business activity carried on as a sole trader).

Type of loss

Select the most appropriate code from the following list and enter it at P9 – label G in your schedule.

Codes to use for P9 – label G

Code	Description
1	Your assessable income from the business activity for 2024–25 is at least $20,000 and you met the income requirement.
2	The business activity produced a profit for tax purposes in 3 out of the past 5 years (2020–21 to 2024–25) and you met the income requirement.
3	The value of real property assets or interests in real property (excluding any private dwelling) used on a continuing basis in carrying on the business activity is at least $500,000 and you met the income requirement.
4	The value of certain other assets (except cars, motorcycles or similar vehicles) used on a continuing basis in carrying on the business activity is at least $100,000 and you met the income requirement.
5	We have written to advise you that the Commissioner will exercise his discretion to allow you to claim a loss for that business activity for 2024–25. This is where the Commissioner has issued a product ruling or a private ruling allowing losses to be claimed from an activity you participated in: Some business activities may be covered by a product ruling or private ruling that doesn't relate to 2024–25. Use loss code 5 only if you have advice in writing that the Commissioner will exercise his discretion for 2024–25. If you apply for a private ruling for the Commissioner to exercise his discretion for 2024–25, but haven't received the ruling, use loss code 8 unless another code applies. Use loss code 5 if your business activity has been affected by bushfire, flood or a government-imposed lockdown or, business closure or restrictions due to COVID-19 and you satisfy the conditions to apply the safe harbour in 2024–25 and choose to apply it.
6	The loss was from a business activity you operated that was a professional arts business and your assessable income (excluding any net capital gain) from unrelated sources was less than $40,000. A professional arts business is a business you carry on as an author of a literary, dramatic, musical or artistic work, as a performing artist, or as a production associate.
7	The loss is from a business activity you operated that is a primary production business, and your assessable income (excluding any net capital gain) from unrelated sources was less than $40,000.
8	The above loss codes don’t apply. You must defer your loss and complete question 16 in your supplementary tax return.

Do you use loss code 5 at P9 – label G?

• No – Go to Deferred non-commercial business losses from a prior year.
• Yes – You must complete Reference for code 5 at P9 – label C in your schedule. Read on.

Reference for code 5

If your business activity is covered by a product ruling that states that the Commissioner will exercise his discretion to allow a loss from that business activity:

• enter PR at C in the Code section of Reference for code 5 for P9 in your schedule
• enter the year of the product ruling at Y in the Year section
• enter the product ruling number at A in the Number section (don't include the year of the product ruling nor the slash).

If your business activity is covered by a private ruling that states that the Commissioner will exercise his discretion to allow a loss from that business activity, write AN at C in the Code section of Reference for code 5 question P9 in your schedule.

If your business activity is covered by the safe harbour and you choose to use it in 2024–25:

• write AN at C in the Code section of Reference for code 5 for P9 in your schedule
• enter SH at A in the Number section.

Deferred non-commercial business loss from a prior year

Write the amount of your deferred non-commercial business loss from a prior year for the business activity at P9 – label H in your schedule. Don't show cents. Your prior year deferred non-commercial business loss for a business activity may be reduced if you earned net exempt income in 2024–25.

If you became bankrupt or received a relief from debt, the deferred losses will no longer be available. The loss can't be deducted in 2024–25 or any future year.

For more information on how exempt income and bankruptcy affect deferred non-commercial business losses, contact us.

Net loss

Write your net loss from the business activity for 2024–25 at P9 – label I in your schedule. Don't show cents. If you completed Worksheet 1 for the activity and the result at row f was negative, this is your net loss amount. The example below (example 9) will help you work out what to include at P9.

Activity 2 and Activity 3

Fill out details for the second and third-largest losses (if applicable) in the same way you have done for Activity 1.

If you make a loss from more than 3 business activities, determine whether you need to defer the loss for each additional business activity. You'll need the total amount of your deferred non-commercial business losses to complete question 16 in your supplementary tax return.

The following example shows how to complete P8 and P9 in your schedule and how the amounts link to your supplementary tax return.

Continue to: Small business entity simplified depreciation – P10

Return to: Instructions to complete the BPI schedule 2025