Why did my business have a tax loss? An understatement is that this has certainly been a difficult year, and we are certainly seeing that many businesses have made a tax loss.
A tax loss is when the total deductions you can claim, excluding gifts and donations, are greater than your total income for any income year.
If your business makes a tax loss, you may be able to:
• offset the loss in the same income year against other assessable income, or
• carry forward the loss and claim it as a business deduction in a later financial year.
It is for this reason why it is still important that we attend to your financial statements and/or income tax returns on an accurate & timely basis.
If you’re a sole trader or in a partnership and want to offset a tax loss, first check if you meet at least one of the non-commercial loss requirements.
If you do meet the requirements, then you can offset the loss against other assessable income (such as salary or investment income) in the same income year.
If you don’t meet the requirements, you can defer the loss or carry it forward to future years. For example, you can offset it when you next make a profit.
If your business is a company, you can generally choose the year you want to claim a deduction.
We at Financially Sorted, as tax professionals, will certainly help with the objective of legally maximising the benefits of any tax losses that your business may incur. Contact Us.
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