# ATO: Claiming a tax loss for your business



## Jack Malarkey (Jan 11, 2016)

From the Australian Taxation Office’s small business newsroom:









Claiming a tax loss for your business


Find out what to do to claim a tax loss correctly.




www.ato.gov.au






*Claiming a tax loss for your business*








*4 March 2022*

Before you claim a tax loss, make sure you have correctly claimed expenses that you are entitled to. 

Overclaiming expenses can put your business in an incorrect tax loss situation.

It’s also important to remember to apportion your expenses correctly, so that only the business portion of the expense is claimed, and not any personal component of the expense.

Keeping accurate and complete records will help you keep track of your tax losses. It can help you avoid incorrectly carrying back a tax loss or carrying forward tax losses to deduct in future years.

If your business makes a tax loss in the current year, you can generally carry forward that loss and claim a deduction for your business in a future year.

You may be able to offset current year losses if you're a sole trader or an individual partner in a partnership and meet certain conditions.

If you’re an eligible corporate entity (company, corporate limited partnership or public trading trust), you may be able to claim the loss carry back tax offset. You can check your eligibility for this tax offset using our loss carry back offset tool.

*Find out more*

How to claim a tax loss
Claiming previous year losses 
Loss carry back tax offset
Loss carry back tax offset tool
Digital record keeping for business


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## Jack Malarkey (Jan 11, 2016)

Australian Taxation Office:









How to claim a tax loss


Losses may be claimed by individuals, partnerships, trusts, companies, consolidated groups and designated infrastructure project entities.




www.ato.gov.au





*Non-commercial losses*

If you're carrying on a non-commercial business activity as an individual, either alone or in a partnership, and your business makes a loss, you must check the non-commercial loss rules. The rules provide if you can offset the loss against your income from other sources, such as wages.

[end of extract]

(Broadly speaking, you can as a sole trader offset a business loss against other income such as wages only if your assessable income from the business for the income year is at least $20,000 (excluding GST). The $20,000 is adjusted downwards if you have been carrying on the business for only part of the income year.

(If you can’t offset the business loss in the current year, you quarantine it and carry it forward for offset against business income in future years.)

Australian Taxation Office:









Four tests


To be able to offset your business loss against other income, you and your business need to meet a number of pre-requisites.




www.ato.gov.au





*Assessable income test*

To pass the assessable income test, assessable income from your business activity during the financial year must be at least $20,000.

Assessable income includes:


ordinary income – for example, the gross earnings (excluding GST) of a business activity, and
statutory income – for example, capital gains.
If you pass the assessable income test, you can claim your losses in the current year.

Any income normally included as assessable income from the sale of depreciating assets in the normal course of business is included in assessable income for this test. This also applies for capital gains and fuel tax credits.

*Part year trading*

If you were in business for less than a year, or you stopped carrying on your business activity during the year, you can make a reasonable estimate of what your assessable income would have been for that full year. If that amount is greater than $20,000 then you are considered to have met the assessable income test.


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