Can You Carry Forward Tax Losses to Next Year? 

 

What Does Operating at a Loss Mean? 

Operating at a loss means your business is spending more money than it’s earning. 

This is common for: 

  • Startups in early stages 

  • Businesses in growth phases 

It’s manageable if you have savings to cover costs until revenue improves. However, if losses persist due to low sales, you may need to rethink your strategy—consider consulting a financial advisor. 

 

Signs You’re Operating at a Loss 

  • Struggling to pay bills 

  • Negative bank balance with no recovery plan 

  • Sales falling short of forecasts (e.g., selling 3 coffees/day instead of 10) 

  • Relying on future income (e.g., unpaid invoices) to cover current losses (This is a cash flow issue—you may need short-term funding.) 

 

What to Do If You’re Operating at a Loss 

1. Reduce Expenses 

  • Cut unnecessary spending 

  • Lower owner’s drawings 

  • Negotiate with suppliers 

  • Sell unused assets 

2. Increase Sales 

  • Raise prices (if market allows) 

  • Attract more customers 

  • Boost marketing efforts (Test small campaigns first—e.g., $100 instead of $1,000.) 

3. Seek Professional Advice 

An accountant or business advisor can help restructure your finances and avoid long-term trouble. 

 

Claiming Losses at Tax Time 

Tax losses can be carried forward to offset future income, reducing your next tax bill. 

For Sole Traders & Partnerships 

  • Report losses in your tax returns 

  • ATO will confirm the carry-forward amount. 

  • Excess losses can reduce taxable income in later years. 

⚠️ Complex rules apply—consult a tax advisor for guidance. 

 

Common Mistakes to Avoid 

❌ Ignoring early warning signs of losses 
❌ Failing to create a recovery plan 
❌ Spending without repayment ability (This risks insolvency or bankruptcy.) 

 

Final Tip 

If you’re carrying forward losses, professional advice ensures compliance and maximizes tax benefits. Ask peers for trusted advisor recommendations!