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 don't apply if:
- you operate a primary production business and your assessable income from other sources that don't relate to your primary production business is less than $40,000, excluding any net capital gain
- the sum of your taxable income (ignoring any business losses), reportable fringe benefits, reportable superannuation contributions and total net investment losses, is less than $250,000 and your business activity satisfies one of 4 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:
- Non-commercial losses
- Practical compliance guideline PCG 2022/1 Non-commercial business losses – Commissioner's discretion regarding flood, bushfire or COVID-19
- Taxation Ruling TR 2001/14 Income tax: Division 35 – non-commercial business losses
- Taxation Ruling TR 2007/6 Income tax: non-commercial business losses: Commissioner’s discretion.
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