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If your business is running at a loss or producing profit for you then what effect does it have on your tax?
If your business provides net income for you then as a sole trader you can declare your income from business on your own tax return by using a separate business schedule. In terms of partnership business, you need to know that partnership business doesn’t pay tax. It must lodge a partnership tax return declaring all income and show the distribution of income among the partners. Each partner must declare their individual share of the partnership's net income in their individual tax return, on which they will be taxed.
In terms of a loss you may be able to claim your primary production losses immediately against other income only if you meet any of the following two criteria: -

Exception for primary producers:

  • If you face a primary production loss and you are a sole trader or in a partnership business.
  • Your assessable income from other sources has to be less than $40,000, it is important to remember that net capital gain is excluded here.

Non-commercial loss measures:
If you have any non-commercial business loss you can claim your loss if your taxable income, reportable fringe benefits, reportable superannuation contributions and total net investment losses is less than $250,000 and your business activity satisfies the following four tests:

  •  Your business produced assessable income of at least $20,000.
  • Your business has produced a profit in three of the past five years (including the current year).
  • Your business uses real property or an interest in real property worth at least $500,000 on a continuing basis.
  • Your business uses other assets worth at least $100,000 on a continuing basis.

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