Non-commercial business losses
Individuals with losses from carrying on non-commercial business activities (either alone or in partnership with others) may be required to defer those losses under the non-commercial business losses (NCL) measures. The NCL measures do not apply if:
- you operate a primary production business and your assessable income from other sources that do not relate to your primary production business is less than $40,000, excluding any net capital gain
- the sum of your taxable income, reportable fringe benefits, reportable superannuation contributions and total net investment losses, is less than $250,000 and your business activity satisfies one of four tests, or
- the Commissioner of Taxation exercises discretion to allow the loss to be claimed.
If the NCL measures do apply, the loss cannot be claimed in the year it arises. Instead, it is deferred to the next year in which you carry on the business activity or one of a similar kind. The deferred loss is offset against any profit from the activity in that future year. Whether any remaining loss can be offset against other income for that future year will depend on the operation of the NCL measures in that year.
For more information, see Taxation Ruling TR 2001/14 – Income tax: Division 35 – non-commercial business losses and Taxation Ruling TR 2007/6 – Income tax: non-commercial business losses: Commissioner’s discretion.
Small business entities
Small business entities have access to a range of tax concessions. Broadly, you are a small business entity if you carry on a business and have an aggregated turnover of less than $2 million.
If you are a small business entity for the relevant year, you can choose to access the small business concessions that suit your business. However, you may also have to satisfy other conditions that apply to a particular concession. You will have to review your eligibility for the concessions each tax year.
For more information, see Concessions for small business entities (NAT 71874).