Things you need to know
This question does not apply to activities that don't constitute carrying on a business – for example, the receipt of passive investment income.
There are special rules relating to the deferral of non-commercial business losses. These rules apply to both Australian and foreign business activities.
You will need to lodge a Business and professional items schedule 2024 before you can complete this question. You should lodge your supplementary tax return using myTax or a registered tax agent. If you are unable to use myTax or a registered tax agent, contact us and we will mail you a paper tax and supplementary return and a Business and professional items schedule 2024.
Commissioner's discretion regarding flood, bushfire or COVID-19
If you have made a 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 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.
You can use a 2023–24 loss from a business activity you conducted either as a sole trader or in a partnership to calculate your 2023–24 taxable income only where:
- an exception applies
- you meet the income requirement, and one of the 4 tests is satisfied, or
- you qualify and choose to apply for safe harbour
- the Commissioner has exercised his discretion or ruled that it will be exercised to allow you to claim the loss.
For more information on the safe harbour, exceptions, the income requirement, the 4 tests and the Commissioner's discretion, see P9 Business loss activity details in Business and professional items schedule instructions 2024.
Keep records of each of the net losses deferred for your separate business activities.
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 a similar business activity.
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.
You must defer your loss by completing question 16 in your supplementary tax return. You will need to split the amount into primary production and non-primary production deferred losses. The amount at question 16 can't be used to reduce your 2023–24 taxable income.
Did you conduct a business activity:
- as a partner in a partnership that resulted in a loss or resulted in a loss after deducting your expenses, or
- as a sole trader that resulted in a loss?
If you answered:
- No – Go to question 17 Net farm management deposits or repayments.
- Yes – You should lodge your tax return using myTax or a registered tax agent.
If you are unable to use myTax or a registered tax agent, contact us and we will mail you a paper tax and supplementary return and a Business and professional items schedule 2024.
What you need to answer this question
You will need to lodge a Business and professional items schedule 2024, see Business and professional items schedule instructions 2024.
You will also need:
- Partnership documents that have information on the special rules that determine whether a business activity you carry on in partnership with others satisfies any one of the 4 tests.
- Any written advice from us to you 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.
Completing your supplementary tax return
If lodging by paper, you can't enter amounts in the supplementary tax return for this question. You should lodge your tax return using myTax or a registered tax agent.
If you are unable to use myTax or a registered tax agent, contact us and we will mail you a paper:
- tax and supplementary return form with fields for questions 14, 15 and 16
- Business and professional items schedule 2024.
To complete this question, review and answer the parts below.
Part A
To complete this question, you need to read and complete the Business and professional items schedule 2024. For instructions, see Business and professional items schedule instructions 2024.
Part B
This part applies to you only if you carried on a business in partnership with others. Don't complete this part if you were in a partnership that did not carry on a business.
Were you a partner in a partnership?
- No – Go to Part C.
- Yes – Read on.
Did you make a net loss from a business activity carried on in partnership with others in 2023–24?
- No – Go to Part C.
- Yes – Read on.
If you made a net loss from more than one business activity in partnership with others, you need to answer the questions and follow the steps on this page for each of your business activities.
Did your net loss from that business activity come within an exception described at P9 in Business and professional items schedule 2024?
- No – Read on.
- Yes – Go to Part C.
Did you meet the income requirement and your net loss from that business activity satisfied one of the 4 tests?
- No – Read on.
- Yes – Go to Part C.
For information on the income requirement and the 4 tests, see Business and professional items schedule instructions 2024.
Did you qualify for and choose to apply the safe harbour in relation to your net loss?
- No – Read on.
- Yes – Go to Part C.
For information on the safe harbour, see P9 Business income and expenses in Business and professional items schedule instructions 2024.
Have we advised you in writing that the Commissioner will exercise his discretion to allow you to claim a net loss from that business activity for the year?
- No – Follow the steps below.
- Yes – Go to Part C.
Step 1
Write the total of your net losses to be deferred from business activities you carried on in partnership with others at question 16 – label F in your supplementary tax return.
Step 2
Check that you have included the amount of your deferred non-commercial business losses in working out your net distribution at questions 13 and 20 in your supplementary tax return; otherwise, you will have overstated your taxable income.
Step 3
Make sure that you have completed P3 and P9 in the Business and professional items schedule 2024.
Part C
Did you make a net loss from a business activity as a sole trader in 2023–24?
- No – Go to Part D.
- Yes – Read on.
If you made a net loss from more than one business activity as a sole trader, you need to answer the questions and follow the steps below for each of your business activities.
Did your net loss from that business activity come within an exception described at P9 in Business and professional items schedule 2024?
- No – Read on.
- Yes – Go to Part D.
Did you meet the income requirement and your net loss from that business activity satisfied one of the 4 tests?
- No – Read on.
- Yes – Go to Part D.
For information on the income requirement, the 4 tests and business tax break deductions, see Business and professional items schedule instructions 2024.
Did you qualify for, and choose to apply, the safe harbour in relation to your net loss?
- No – Read on.
- Yes – Go to Part D.
For information on the safe harbour, see P9 in Business and professional items schedule instructions 2024.
Have we advised you in writing that the Commissioner will exercise his discretion to allow you to claim a net loss from that business activity for the year?
- No – Follow the steps below.
- Yes – Go to Part D.
Step 1
Write the total of your net losses to be deferred from business activities as a sole trader at question 16 – label G.
Step 2
Check that you have included the amount of your deferred non-commercial business losses in working out your net income or loss at questions 14, 15 and 20 in your supplementary tax return; otherwise, you will have overstated your taxable income.
Step 3
Make sure that you have completed P3 and P9 in the Business and professional items schedule 2024.
Part D
Follow the steps below.
Step 1
Add up any amounts of primary production deferred losses at question 16 – labels F and G. Write the total of primary production deferred losses at question 16 – label I.
Step 2
Add up any amounts of non-primary production deferred losses at question 16 – labels F and G. Write the total of non-primary production deferred losses at question 16 – label J.
Step 3
You must record the 3 highest loss-making business activities (if applicable) at P9 Business loss activity details in the Business and professional items schedule 2024, whether or not:
- the net loss from your business activity came within an exception
- you met the income requirement and the net loss from your business activity satisfied one of the 4 tests
- the Commissioner had advised that he will exercise his discretion to allow the net loss from your business activity to be claimed this year
- you had carried on the business activity in a partnership or as a sole trader.
Where to go next
- Go to question 17 Net farm management deposits or repayments 2024.
- Return to main menu Individual tax return instructions 2024.
- Go back to question 15 Net income or loss from business 2024.