If you’re a sole trader and your business makes a loss, you can’t automatically use that loss to reduce your wages or other income. Whether you can depends on the non-commercial loss rules.
This article explains how to check that in TaxTank — specifically, how to run the non-commercial loss test so you can see whether your losses can be used this year or need to be carried forward.
Before testing, TaxTank needs two things:
Your prior-year business losses, taken from your previous tax return
Your current-year business results, so the rules can be applied correctly
Once that’s in place, TaxTank will guide you through the test and automatically apply the outcome — either offsetting the loss against your other income or carrying it forward to be tested again next year.
Step 1: Add any prior-year business losses
To run the test correctly, make sure any losses from earlier years are recorded.
You can add these at setup or anytime later:
Go to Sole Tank → Business
Open the Business Losses section
Select the edit icon
Enter the amount in the Opening balance field
Once added, TaxTank tracks the loss automatically.
Step 2: Run the non-commercial loss test
This is the step that determines whether your business loss can reduce your other taxable income (such as wages). To run the test:
Go to Sole Tank → Business
Open the Business Losses section
Select the edit icon
Click Start the test
The test is broken into three sections. You only need to pass one of them for your loss to be applied against your other income in your tax summary.
What happens after the test?
If you pass
Your business loss will be included in your tax summary and used to reduce your other taxable income.If you don’t pass
The loss is carried forward to the next financial year and can be tested again.
There’s no expiry date on business losses, they continue rolling forward until the rules allow them to be used.
How losses are applied (behind the scenes)
Prior-year losses are applied first against any current-year business profits
If profits are lower than the loss, or the business makes another loss, the unused amount carries forward
TaxTank handles this automatically, so the correct outcome flows through without manual adjustments.
Why this matters
Applying business losses incorrectly can cause issues later.
Running the non-commercial loss test ensures you:
Stay compliant with ATO rules
Avoid offsetting losses too early
Use losses as soon as you’re entitled to
Most importantly, it gives you a clear answer to a very common question: “Can I use this loss this year, or not yet?”
Common Q&A's
Q: Can I automatically use my business loss to reduce my wages?
A: No. Business losses don’t automatically offset wages or other income. You must first pass the non-commercial loss rules. If you don’t pass, the loss is carried forward.
Q:What happens if my business makes a loss again this year?
A: If the business makes another loss and you don’t pass the non-commercial loss test, the total loss amount rolls forward to the next financial year. There’s no expiry date.
Q:What if my business made a profit this year?
A: Any prior-year losses are applied first to reduce that profit. Only after profits are offset does the non-commercial loss test determine whether any remaining loss can be used against other income.
Q: Do I need to run the test every year?
A: Yes. The non-commercial loss test applies each financial year. A loss that couldn’t be used last year may be usable in a future year if circumstances change.
Q: Where do I find my prior-year business losses?
A: You’ll find them in your previous tax return. Once entered into TaxTank, they’ll be carried forward automatically.
Q: What if I pass one part of the test but not the others?
A: That’s fine. You only need to pass one section of the non-commercial loss test for your loss to be applied against your other taxable income.
Q: Will TaxTank apply the result automatically?
A: Yes. Once the test is completed, TaxTank automatically applies the correct treatment in your tax summary — either offsetting the loss or carrying it forward.
Q: Do business losses ever expire?
A: No. Business losses don’t expire. They continue to roll forward until they can be used under the rules.