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NZ Self-Employed Tax Loss: Carry Forward on the IR3

17 October 2026 · Guide · Not tax advice

Short answer: IRD says that as a self-employed person you have a loss for tax purposes if your deductible expenses are greater than your income, and you can use that loss to reduce your taxable income in the next tax year. You claim the loss when you file an IR3 return the year after you made it; IRD then tells you how much you can carry forward. IRD sends a loss carried forward letter after you file; you put the amount in Box 31A (total brought forward) and Box 31B (amount you claim this year) of the next IR3 (IR3 guide, Question 31). If the loss brought forward is greater than your income, the excess carries forward to later years until it is fully used.

Points from the IRD page

• When the carried amount can change: after an audit or voluntary disclosure that changed the loss; if you used some of the loss to pay tax debts or shortfall penalties; or if you were declared bankrupt and the loss relates to debts you do not have to pay.
• Student loans: do not include a loss from a business or investment activity when you work out student loan adjusted net income, and losses brought forward are not included in total adjusted net income in the IR3 (see student loan page). IRD also excludes the loss from Working for Families income.
• Residential rental losses are ring-fenced: IRD's IR3 guide says excess residential rental deductions are carried forward (Box 22I) rather than offset against other income, except in the situations listed there (for example a taxable sale of the property or portfolio).
• Separate activities carried on together: if one makes a loss while another makes a profit, you can offset the loss against similar income from the other, per IRD.

Made-up example

(Assuming no other income.) Year 1: income NZ$20,000, deductible expenses NZ$26,000, loss NZ$6,000. Year 2: income NZ$30,000, expenses NZ$18,000, profit NZ$12,000 before the loss; after using the NZ$6,000 loss brought forward, taxable income is NZ$6,000. IRD confirms the amount available.

Related

IR3 due 7 July 2027 · Income tax rates · Record keeping · First year in business

FAQ

Can I offset a business loss against my salary? The IRD's IR3 guide defines net income as total income from all sources less allowable deductions or current year losses (not including losses brought forward), so a business loss for the year is worked out against your other income on the IR3 first; only a remaining net loss is carried forward (IR3G, Question 31). Residential rental losses follow separate rules and are not freely offset (IR3G, Question 22).

Do I need to file even with a loss? The page says you claim it in the IR3 for the following year.

What we could not verify

• The legal basis (Income Tax Act 2007 net loss rules) was not read.
• Rules for companies, look-through companies and partnerships, and any time limit for claiming a loss.
• The IRD page shows no review date.

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