Income Tax Act 2007 section 72

Early trade losses relief – transitional provisions (Schedule 2, paragraphs 21–22)

Section 72 provides early trade losses relief, and paragraphs 21 and 22 of Schedule 2 set out transitional rules governing how this relief interacts with the former ICTA provisions during the changeover period from the old to the new legislation.

• Trade losses arising in 2007-08, 2008-09, or 2009-10 may be carried back against income of earlier tax years (2004-05, 2005-06, and 2006-07), with the relief given in the same manner as it would have been under the old ICTA section 381 rules.
• A special rule prevents a taxpayer being disadvantaged where a 2006-07 loss was denied relief under ICTA section 381(4) because the trade was not conducted on a commercial basis, but the same trade generated a 2007-08 loss whose basis period overlaps with 2006-07.
• If, under the old ICTA rules, the commerciality restriction would not have blocked relief for the 2007-08 loss, then the equivalent restriction in ITA 2007 section 74(1) is disapplied, ensuring the taxpayer is not worse off under the new legislation.
• These transitional rules apply equally to professions and vocations as they do to trades.

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