Why does a non‑commercial loss return fail the $250k income test when income is below the threshold?

 Author: NikkiATO(Community Moderator)Community Moderator

28 Apr 2026

Hi Florence123,

The $250,000 limit in the non‑commercial loss rules relates to the taxpayer’s income test, not the size of the losses being carried forward. Having deferred losses above $250,000 doesn’t, by itself, cause an issue.

Where a taxpayer meets a non‑commercial loss test in the current year, only losses that remain deferred should be reported as deferred losses. Current year losses that are allowable in that year aren’t ‘deferred’.

If the return is treating the entire amount as deferred, the system may trigger a validation error connected to the income test, even where the taxpayer’s other income is below $250,000.

You’ll need to review how the loss amounts have been classified in the return and ensure they accurately reflect which amounts are deferred and which are allowable for the year, in line with the non‑commercial loss rules.

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