First, Activate the Business section using the top right menu icon (four little square).


To record partnership deferred losses, navigate to "Business Loss Activity Details" to record deferred losses, including partnership shares.

The following videos demonstrate handling non commercial losses under different scenarios:

Scenario 1: Full offset of prior loss - Use income test to apply deferred amount against current profit

Scenario 2: Current and prior losses - Track both non-commercial losses separately.

Scenario 3: Prior loss offset with profit remainder - Deduct deferred loss fully, carry forward excess profit if applicable.


Scenario 4: New current-year deferral - Defer fresh loss for future use.


Non-Commercial Losses under Australian Tax Law

Non-commercial losses arise when deductions from a business activity exceed its assessable income, and the activity fails to meet specific viability tests. These rules, in Division 35 of the Income Tax Assessment Act 1997, limit immediate deductions against other income like salary for sole traders or partners.

Four Tests for Deductibility

Taxpayers with adjusted taxable income under $250,000 can offset losses if passing one test:

  • Assessable income test: At least $20,000 assessable income from the activity (pro-rated for partial years).
  • Profits test: Tax profits in 3 of the past 5 years, including current.
  • Real property test: Continuous use of real property (or interests) valued at $500,000+.
  • Other assets test: Continuous use of other assets valued at $100,000+ (excluding cars/motorcycles).

High-income earners ($250,000+) must defer losses regardless.

Deferral and Carry-Forward

Failing tests defers losses indefinitely to offset only future income from the same activity. Track separately by activity.

Exceptions and Discretion

  • Primary production or professional arts activities qualify if unrelated income < $40,000.
  • Commissioner discretion applies for unusual events, downturns, or viable future profits with evidence.

Learn more about from the ATO