If you don’t meet the income requirement or you do, but don’t pass any of the four tests in relation to a business activity, the non-commercial loss rules apply.

You can only offset the loss from that business activity if the Commissioner exercises discretion to allow you to do so. You need to apply to the Commissioner to seek the exercise of their discretion. 

The Commissioner will only exercise discretion in limited circumstances if:

• there are special circumstances outside your control that have prevented you passing one of the four tests, or
• because of the nature of the business, there is a lead time before your business can pass one of the four tests or make a profit.

If there are no grounds for the Commissioner to exercise their discretion, the non-commercial loss rules apply and you need to defer the loss for that income year.

Find out more about the discretion and applying for it.