Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p5
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 5/10)
Character Range: 763533–766535

a position usually occupied by a person with a classification level of the kind mentioned in paragraph (b).

Division 35—Deferral of losses from non‑commercial business activities

Guide to Division 35

35‑1  What this Division is about

      This Division prevents losses of individuals from non‑commercial business activities being offset against other assessable income in the year the loss is incurred. The loss is deferred.
      It sets out an income requirement and a series of tests to determine whether a business activity is treated as being non‑commercial.
      The deferred losses may be offset in later years against profits from the activity. They may also be offset against other income if the income requirement and one of the other tests are satisfied, or if the Commissioner exercises a discretion.

Table of sections

Operative provisions
35‑5 Object
35‑10 Deferral of deductions from non‑commercial business activities
35‑15 Modification if you have exempt income
35‑20 Modification if you become bankrupt
35‑25 Application of Division to certain partnerships
35‑30 Assessable income test
35‑35 Profits test
35‑40 Real property test
35‑45 Other assets test
35‑50 Apportionment
35‑55 Commissioner's discretion

Operative provisions

35‑5  Object
 (1) The object of this Division is to improve the integrity of the taxation system by:
 (a) preventing losses from non‑commercial activities that are carried on as *businesses by individuals (alone or in partnership) being offset against other assessable income; and
 (b) preventing pre‑business capital expenditure and post‑business capital expenditure by individuals (alone or in partnership) in relation to non‑commercial activities being deductible under section 40‑880 (business related costs);
unless certain exceptions apply.
 (2) This Division is not intended to apply to activities that do not constitute carrying on a *business (for example, the receipt of income from passive investments).

35‑10  Deferral of deductions from non‑commercial business activities
 (1) The rule in subsection (2) applies for an income year to each *business activity you carried on in that year if you are an individual, either alone or in partnership (whether or not some other entity is a member of the partnership), unless:
 (a) you satisfy subsection (2E) for that year, and one of the tests set out in any of the following provisions is satisfied for the business activity for that year:
 (i) section 35‑30 (assessable income test);
 (ii) section 35‑35 (profits test);
 (iii) section 35‑40 (real property test);
 (iv) section 35‑45 (other assets test); or
 (b) the Commissioner has exercised the discretion set out in section 35‑55 for the business activity for that year; or
 (c) the exception in subsection (4) applies for that year.
Note: This section covers individuals carrying on a business activity as partners, but not individuals merely in receipt of income jointly. Compare the definition of partnership in subsection 995‑1(1).