Complete this section if you have a loss from a business activity you carried on either as a sole trader or in a partnership. Foreign business losses shown in the Foreign income, assets and entities section at Other foreign income are to be included here. If your activity is carried on partly in Australia and partly overseas, you need to combine the results of both to see if you have an overall loss from the activity before completing this item.
Non-commercial business losses
Under the rules for non-commercial business losses, you can use a 2015–16 loss from a business activity you conduct either as a sole trader or in partnership to calculate your 2015–16 taxable income only if it meets one of these conditions:
- an exception applies
- you meet the income requirement and one of the four tests is satisfied
- you meet the income requirement and none of the four tests is satisfied, but the Commissioner of Taxation has exercised his discretion, or ruled that it will be exercised, to allow you to claim the loss
- you do not meet the income requirement, but 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 Business loss activity details.
You cannot claim losses arising from activities you conduct that are a private recreational pursuit or hobby, or if there is no likelihood of profit.
The rules for non-commercial business losses apply to both foreign and Australian business activities.
Deferring your loss
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.
If you are unable to claim your loss against other income this year because of these rules, you must complete this section. myTax will automatically show the amount
as a deferred non-commercial loss. This amount cannot be used to reduce your 2015–16 taxable income.
Completing this section
Having difficulty finding a Main business or professional activity description?
If you are, we recommend you take the following steps:
- Enter your activity into the Business industry code search toolThis link opens in a new window
- From the search tool results, click on the link for the most appropriate description for your activity.
- From here, you will see a number and a bolded description (for example 69320 Accounting Services). Enter this bolded description at Main business or professional activity in myTax.
- There are a limited number of bolded descriptions from the Business industry code search tool that are not listed in myTax. If this applies to you, use the list below to determine what you should choose to enter at Main business or professional activity in myTax:
From the Business industry code search tool |
In myTax |
---|---|
Nursery Production (Under Cover) |
Nursery and Floriculture Production |
Forestry |
Forestry and Logging |
Basic Organic Chemical Manufacturing |
Basic Chemical Manufacturing |
Computer and Electronic Equipment Manufacturing |
Computer and Related Manufacturing |
Waste Remediation and Materials Recovery Services |
Waste Treatment, Disposal and Remediation Services |
Other Agricultural Product Wholesaling |
Agricultural Product Wholesaling |
Clothing and Footwear Wholesaling |
Textile, Clothing and Footwear Wholesaling |
Sport and Camping Equipment Retailing |
Recreational Goods Retailing |
Telecommunications Services |
Wired Telecommunications Network Operation |
Taxi Service Operation |
Taxi Service Operation (Owner Operator) |
Taxi Driver |
Taxi Driver (Except Owner Operator) |
Superannuation Funds |
Superannuation Funds or First Home Saver Account Trusts |
Other Auxiliary Finance and Investment Services |
Auxiliary Finance and Investment Services |
Other Specialised Design Services |
Architectural, Engineering and Technical Services |
What you may need
- Any written advice from the ATO 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.
- If you are a partner in a partnership, you will need the following details for each business activity that you, as a partner, were involved in:
- the amount of assessable income earned by the partnership for the activity
- the share of partnership's assessable income, real property and certain other assets, attributable to partners who are not individuals
- your share of income or loss from the partnership for the activity.
- You may need to see 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.
- For each business activity from which you made a loss, select Add and enter information into the corresponding fields.
- For Type of loss, select the most appropriate number code from the following list:
- 0: Your partnership loss was derived from passive investment income. You must declare all partnership losses at this section including income from passive investments, for example, income from a rental property. You do not need to defer losses derived from passive income from partnerships.
- 1: Your assessable income from the business activity for this income year was at least $20,000 and you met the income requirement.
- 2: The business activity produced a profit for tax purposes in three out of the past five years (including the current year) 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 was at least $500,000 and you met the income requirement.
- 4: The value of certain other assets (except cars, motor cycles or similar vehicles) used on a continuing basis in carrying on the business activity was at least $100,000 and you met the income requirement.
- 5: The ATO has advised you in writing that the Commissioner will exercise his discretion to allow you to claim a loss for that business activity for this income year. 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. This code also applies where codes 1, 2, 3 or 4 apply and you have a farm management deposit repayment that can be offset against the primary production loss so that you satisfy the income requirement for that loss.
- 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 sources not related to that activity 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 sources not related to that activity was less than $40,000. Use loss code 5 if you have a farm management deposit repayment that can be offset against the primary production loss so that your assessable income (excluding any net capital gain) from sources not related to that activity was less than $40,000.
- 8: The above loss codes don’t apply. You must defer your loss.
- If the Type of loss is 5: Commissioners discretion enter the details of the ruling. Some business activities may be covered by a product ruling or private ruling that does not relate to the current income year. Use loss code 5 only if you have advice in writing that the Commissioner’s discretion will be exercised for 2015–16. If you have applied for a private ruling about the exercise of the Commissioner’s discretion for 2015–16, but have not yet received the ruling, use loss code 8 unless another code applies.
- Enter the net loss details into the corresponding fields:
- If the Type of Loss is 8: None of the codes apply – loss deferred
enter your net loss from the business activity in the following fields- Primary production – your share of total deferred non-commercial loss
- Non-primary production – your share of total deferred non-commercial loss.
- If the Type of loss in not 8: None of the codes apply – loss deferred
enter your net loss from the business activity in the following fields- Primary production – your share of total loss
- Non-primary production – your share of total loss.
- If the Type of Loss is 8: None of the codes apply – loss deferred
- Enter the amount of deferred non-commercial business loss from a prior year for the business activity at Amount of deferred loss from prior year included in the above amount(s).
- If the Type of Loss is 8: None of the codes apply – loss deferred
you must enter amounts in these three fields:- Deferred loss amount from carrying on a business of investing
- Deferred loss amount from carrying on a rental property business
- Remaining deferred loss amount.
These amounts must add up to your net loss from this business activity.
Enter zero if there is no amount to be shown.
- Select Save.
- Select Save and continue.