Changes to Non-commercial Business Losses

In the 2009 Budget, the government announced changes to the non-commercial losses rules. These changes will further restrict the deductibility of business losses incurred in relation to non-profitable business activities. The measure will ensure excess deductions from unprofitable business activities cannot be used to reduce salary, wage and other income of high income earners.

From 1 July 2009 deductions from unprofitable business activities cannot be used to reduce salary, wage and other income of high income earners by tightening the application of the non‑commercial losses rules. Taxpayers with an adjusted taxable income (see post on ATI) of over $250,000 will instead have excess deductions quarantined to the business activity. The existing rules will continue to apply to taxpayers with an adjusted taxable income of $250,000 or less.

Taxpayers will still have the ability to apply to the Commissioner of Taxation for relief from the rules if there are exceptional circumstances or because the nature of the activities means that they are temporarily carrying on an unprofitable business but the activities they are undertaking are nonetheless independently assessed as commercially viable.