ATO and non-commercial loses

The ATO understands the past few years have been difficult, with floods, bushfires, and COVID-19 affecting many businesses. The ATO wants to help make it easier for businesses impacted by these events, and so have developed a practical compliance guideline (PCG) that may assist. The ATO develops PCGs to address the practical implications of tax laws and outline our administrative approach.

'Currently you need to defer a loss from a non-commercial business activity (like a hobby) to be offset against future income from that same activity. There are some exceptions to this where certain rules in the Income Tax Assessment Act 1997 are met, or if the Commissioner of Taxation exercises his discretion to allow you to offset the loss after considering relevant factors.

Draft PCG 2022/D2 Non-commercial business losses – Commissioner's discretion regarding flood, bushfire or COVID-19 provides a safe harbour for individuals, including partners in a partnership, who:

  • made a loss from non-commercial business activities due to flood, bushfire or COVID-19 government restrictions, and
  • meet the other requirements in the PCG.

If the safe harbour applies to you, you will be able to manage your tax affairs as if the Commissioner had exercised the discretion and offset a loss against your other income. This also means you will not need to apply for a private ruling to seek clarity.

The PCG has examples to help you better understand how the safe harbour can apply in various situations. When finalised, the PCG will apply for the 2019–20, 2020–21 and 2021–22 income years.

Remember, registered tax agents can help with your tax.'


12 May 2022