Australian tax law lets you carry forward two distinct types of losses indefinitely: revenue losses (business losses, some rental losses) and capital losses. They behave differently. Revenue losses can be applied against any assessable income in a future year — salary, business income, interest, even capital gains in certain orderings. Capital losses are quarantined: they only offset capital gains, never ordinary income.

For individuals running a business or sole trade, the non-commercial loss rules can defer revenue losses if your business doesn't meet one of the activity tests (assessable income $20k+, profit in 3 of 5 years, real-property or other-asset value tests, or an exception for certain professional activities). Deferred losses don't disappear — they sit there until the activity passes a test or generates assessable income to absorb them.

Capital losses follow a specific application order: first against this year's capital gains, then carried forward to future years. The CGT discount (50% for individuals on assets held over 12 months) is applied AFTER capital losses — so $10,000 of capital loss applied to $20,000 of pre-discount gain leaves $10,000, which becomes $5,000 after the 50% discount, not $10,000 minus a discounted amount. Get the order wrong and you wastefully under-claim.