Claiming business losses

September 11, 2017

If you are a sole trader or a partner in a small business that has made a loss, please read the following carefully.

Small business owners can only claim losses against other income if:

1. One of the exceptions for primary production or professional arts businesses applies.

If you have a loss from a primary production or professional arts business activity and your assessable income from other unrelated sources is less than $40,000, excluding net capital gains.


2. You meet the income requirements.

Your total income is less than $250,000. Total income includes: your taxable income before deducting business losses; reportable fringe benefits; reportable superannuation contributions in excess of Superannuation Guarantee provisions; and net investment losses (including financial investment losses and rental property losses).


You meet one of the four deductibility tests.

1. You had assessable income from the activity of at least $20,000.
2. You have produced a profit in three out of the last five years, including the current year.
3. You use real property or an interest in real property worth at least $500,000 in the business on a continuing basis.
4. You use other assets such as plant and equipment worth at least $100,000 in the business on a continuing basis.


The Commissioner of Taxation has exercised his/her discretion to allow you to claim the loss.


The loss is solely due to a deduction claimed under the small business and general business tax break.

If you cannot claim a loss in a given year because you have not met the criteria, it must be carried forward and claimed against future profits from that business, but only to the extent of the profit. You cannot vary your PAYG income tax withholding in anticipation of being able to claim the losses in a future period.

This can be confusing so it’s best to speak to your tax adviser to see what you can do about your business losses.

For more information, contact us at Leenane Templeton on (02) 4926 2300 or email

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