To be eligible to apply business losses to current financial year: Need to:

  • 1) Be business losses
  • 2) Meet Income Requirement Test: adjusted taxable income need to be LESS than $250,000

    example below fails to meet Income Requirement Test, because adjusted taxable income is higher than $250,000
    --> Consequently, business losses ($9,384) must be deferred to future year, cannot be apply in current financial year.
    Thus higher tax payable for current financial year.

  • 3) Meet ONE of FOUR tests
    • assessable income test: Business assessable income in current FY must be >= $20,000 
    • profits test: Business made a tax profit in  3 out of the past 5 years (including current year)
    • real property test: have >= $500,000 assets in value is used in business activity on a continuing basis (e.g. land, buildings, interests in property)
    • other assets test: other certain business assets value >=$100,000 (eg. PPE, trading stock, leased assets, intangible assets)

Otherwise, business losses MUST BE DEFERRED TO FUTURE YEAR. 

ATO  link