Offsetting Business Losses In The Current Year – Partnerships

Partnerships

If you are a partner in a partnership, you – as an individual – may offset your share of a partnership loss against your other income, subject to the non-commercial loss rules

Income Requirement
The non-commercial losses income requirements are applied to the individual partners the same as to an individual.

Assessable Income Test
If you are a member of a partnership and all the other partners are individuals, the assessable income of the whole partnership must be at least $20,000 before the individual members can deduct losses.

Assessable income earned by an individual member from business activities outside of the partnership can only be considered by that member. Partnership members who are companies and trusts must have their share of the assessable income excluded.

If a partnership carries on more than one business activity, the income and deductions must be accounted for separately for each unless they are similar activities.

Profits Test
If you are carrying on a business activity in a partnership, you will be able to claim a loss if your income from the activity has been greater than your tax deductions for the activity for at least three out of the past five years (including the current year) and you meet the income requirement. This calculation must consider both your income from the partnership and any income you may have earned in your own right from that activity.

Real Property Test
If you are a member of a partnership and all the other partners are individuals, the value of the real property used in the partnership business must be at least $500,000 before the individual members can deduct losses. Any real property owned by partnership members that are companies or trusts must be excluded, as well as any property owned by the individual partners in their own right.