Finance and tax

Non-commercial business loss review

Whether an individual can use a business activity loss against other income now or must defer it against future income from that activity.

Reviewed 30 July 2026Income years 2025-26 and 2026-27

Who can claim

This deduction is available to individuals.

  • You are an individual carrying on a business activity, alone or as a partner, and the activity produces a tax loss for the income year.
  • If income for non-commercial-loss purposes is below $250,000, the loss can be used against other income where the activity passes at least one test: $20,000 assessable income; a tax profit in 3 of 5 years including the current year; at least $500,000 of qualifying real property used continuously; or at least $100,000 of qualifying other assets used continuously.
  • The primary-production or professional-arts exception can apply where assessable income from unrelated sources, excluding net capital gains, is less than $40,000.
  • The Commissioner's discretion can permit current use in qualifying special circumstances or where the nature of the activity creates a commercially viable lead time.

What you cannot claim

  • A passive investment loss that is not from carrying on a business activity is not tested under Division 35.
  • If the $250,000 income requirement is not met, passing one of the four objective tests does not by itself release the loss.
  • A home and private-use land, cars and other statutorily excluded assets do not count toward the real-property or other-assets tests.
  • A deferred activity loss is not entered again as an ordinary prior-year tax loss.

How the amount is worked out

Test each business activity separately. If an exception applies, or the income requirement plus one objective test is met, or the Commissioner exercises the discretion, apply the eligible loss against other income. Otherwise defer it and use it only against future profit from the same or a similar business activity when Division 35 permits.

Records the ATO expects

  • Business-activity income and expense schedule
  • Non-commercial-loss income calculation
  • Five-year profit history
  • Real-property and other-asset test schedules
  • Primary-production or professional-arts evidence
  • Commissioner's discretion material
  • Deferred-loss register by activity

Before you rely on this rule

This review controls when an activity loss can reduce other income; it is not an extra expense deduction.

Where this rule comes from

Primary source: ATO business losses (Updated 6 May 2025). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.

Supporting sources:

Next steps