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Tral(Newbie)Newbie
16 Feb 2024

My sole trader business reported a loss in 2021 - 2022. The business could not pass the four tests of the non-commercial loss rules. Therefore, the loss was reported as a deferred loss in the 2021-2022 tax return.


I operated the same business in 2023 and made a taxable profit before claiming any prior year deferred losses. However, in the 2022-2023 year too, the business could not pass the four tests of the non-commercial loss rules.


After reading the ATO publications, I understand that I can't claim the deferred loss from my other income (such as employment income, interest income, etc...) in 2022-2023 unless the business can pass the four tests of the non-commercial loss rules.

 

If someone can, please clarify whether I am entitled to offset the 2021-2022 deferred loss up to the business profit in 2022-2023 from the same business that resulted in the deferred loss and then carry forward any remaining loss as deferred loss in the 2022-2023 income tax return as the business can't satisfy the four tests of the non-commercial loss rules.

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1,143 views
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TimD(Initiate)Initiate
16 Feb 2024

Hi Tral,


If I understand your question correctly, yes, you need to bring your deferred loss from the 21/22 financial year into your 22/23 tax return, this loss will be applied against your business profit in 22/23. If the deferred losses are greater than your profit in 22/23, then any remaining losses will need to be deferred again to the next financial year (unless you meet one of the criteria to claim the loss against other income).


Hope that helps,

Tim

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Most helpful reply

TimD(Initiate)Initiate
16 Feb 2024

Hi Tral,


If I understand your question correctly, yes, you need to bring your deferred loss from the 21/22 financial year into your 22/23 tax return, this loss will be applied against your business profit in 22/23. If the deferred losses are greater than your profit in 22/23, then any remaining losses will need to be deferred again to the next financial year (unless you meet one of the criteria to claim the loss against other income).


Hope that helps,

Tim

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Can I claim last year deffered non-commecial loss from current year profits of the same business? | ATO Community