How to claim a tax loss the right way

Generally, you make a tax loss when your business expenses are more than your income. Or more specifically, when your total deductions are more than your total assessable and net exempt income for an income year.

If you make a tax loss, you may be able to:

  • claim it in the current year

  • carry it forward, or

  • carry it back.

Before you claim a tax loss, check that you’ve correctly:

  • accounted for all your business income

  • claimed expenses such as cost of goods sold, motor vehicle and ‘all other’ expenses

  • apportioned expenses that have been a mix of business and private use

  • applied your loss to the right year.

Don’t forget:

  • A capital loss is different to a tax loss ̶ it can only be offset against future capital gains but not against income.

  • If you’re claiming a tax loss from a previous year and your business is a company, you may need to meet requirements such as the ‘similar business test’.

  • Accurate and up-to-date records will help you better calculate income and expenses.

A registered tax agent can help if you need more information about managing tax losses. Call us on 03 5201 7960. 

Source: ATO September 2021
Reproduced with the permission of the Australian Tax Office. This article was originally published on

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