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_Susama1(Initiate)Initiate
26 Aug 2021

Hey guys,

I just have a few questions regarding a sole trader business. So last year I turned a small profit, despite having quite high expenditure, I still made some profit and I declared that income along with the expenditure and was taxed accordingly. My circumstance this year is a little different though, the amount of income I made from my sole trader business was less than my expenditure this year.

So my questions are:

1. Is that considered a loss? If the total amount of income I made this year is less than my expenditure, is that a loss? Can I claim anything?

2. Is there anything special I need to tick/mark/fill-in when filling in my tax returns. IE as of now I would just type in the amount of income I've earned from my sole trader business and then I would also enter my expenditure. But after I enter those details, the expenditure would be more than my income from the business, do I then need to enter any details in other places?

For context the business is a PC video game and it's basically in paid open alpha, where users can buy the game to support it but it is still in development too so that's why this year I still have quite a high expenditure amount since I am still in active development but haven't had as many sales.

Thanks in advance, really need some help.

2,451 views
6 replies
2,451 views
6 replies

Most helpful response

Most helpful replyATO Certified Response

KylieATO(Community Support)Community Support
ATO Certified Response2 Sept 2021

Hi @Susama1

If your expenses are more than your income, then yes, that's a loss. You still claim all your expenses, but the net loss from the business will usually need to be deferred until that business runs at a profit. The exception to this is where you meet the non-commercial losses rules.

MyTax will automatically calculate your loss once you enter in all your income and expenses for it. You'll still need to complete the loss details section to finalise it and defer the loss. You can read about completing the loss details on our website.

All replies

KylieATO(Community Support)Community Support
30 Aug 2021

Great questions @Susama1,

We will put together some information and let you know.

_Susama1(Initiate)Initiate
30 Aug 2021

Hi Kylie,

Thanks for the response and yes please do, it would help a lot. Last tax returns, my sole trader business made around 13k and my expenses were only 5k so it was pretty straightforward. This year however the sole trader business only made around 3k and yet my expenses still hovered around 5k.

It would be great to first know if my situation is considered a loss.

Then it would be nice to know too how I would go about entering the figures, do I just enter as I did last year and new options pop up if it notices my expenses are less? I'm not sure how to go about it and would love some clarification, the online material isn't that clear to me.

Most helpful replyATO Certified Response

KylieATO(Community Support)Community Support
ATO Certified Response2 Sept 2021

Hi @Susama1

If your expenses are more than your income, then yes, that's a loss. You still claim all your expenses, but the net loss from the business will usually need to be deferred until that business runs at a profit. The exception to this is where you meet the non-commercial losses rules.

MyTax will automatically calculate your loss once you enter in all your income and expenses for it. You'll still need to complete the loss details section to finalise it and defer the loss. You can read about completing the loss details on our website.

_Susama1(Initiate)Initiate
2 Sept 2021

Hi Kylie,

Thanks for responding, that's a bit clearler now, I have another question though.

I also get wages from a part-time job in addition to my own sole trade business. Do I need to offset my losses from my sole trader business against my salary/income from the part-time job? On top of that, I also have a rental property.

For example, let's say my sole trader business only made 3k this year, but the expenses was 5k and then from my part-time job, I earned an additional 10k. Then in addition to that, my rental property brought in another 10k. How would that work or are they just completely separate things? Do you think you could give me a quick breakdown of how those 4 sources interact with each other?

BlakeATO(Community Support)Community Support
6 Sept 2021

Hi @Susama1

Generally you can only offset your business losses against income from that same business.

If, however, you meet the non-commercial losses rules, your business loss can help reduce your other sources of taxable income.

Your rental income and employment income go into the same "bucket", and negatively geared rental properties can offset against your other income. Businesses work a little differently, but if you meet the non-commercial losses rules, you can use that loss against the "bucket" of other taxable income.

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Business Loss vs Expenditure? A couple questions. | ATO Community