Income Tax Act 2007 section 65

How relief works

Section 65 explains the mechanics of how trade loss relief against general income is applied, including the order in which deductions are made and the priority rules when competing claims arise.

• A trade loss is first deducted from the person's net income for the specified tax year, and any unrelieved balance can then be set against the other tax year if a claim covers both years
• The amount deductible in any year is capped by the rules in sections 24A and 25(4) and (5), meaning relief cannot exceed the person's total income for that year
• Any loss still unrelieved after these two steps may be used under other available reliefs within the same chapter, depending on the terms of those reliefs
• Where trade loss claims for two successive years both target the same tax year's income, the earlier year's loss takes priority — and this priority rule also applies when a trade loss claim overlaps with an employment loss relief claim