Before you claim a tax loss for your business, you need to make sure that you have correctly claimed the expenses that you are entitled to. If you overclaim expenses, your business can be put into an incorrect tax loss situation, which can make things complicated.

Generally, a business can make a tax loss when the amount spent on expenses outweighs the income.

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 of 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

You also do not want to forget that:

• A capital loss is different to a tax loss – it can only be offset against future capital gains but not 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 your income and expenses. It can also help you to avoid incorrectly carrying back a tax loss or carrying forward tax losses to deduct in future years.

If you are a sole trader or an individual partner in a partnership (who meet certain conditions), you may be able to offset current year losses

If you’re an eligible corporate entity (company, corporate limited partnership or public trading trust), you may be able to claim the loss carry-back tax offset. You can check your eligibility for this tax offset using the ATO’s loss carry-back offset tool, or by consulting with us.

Remember, registered tax and BAS agents like us are equipped to help you with your tax concerns as we approach the best time of year to start planning the next year for your business.