When a business or rental property makes a loss for the year (so expenses are higher than income) it results in a loss for income tax purposes. For Sole Traders, Partnerships or LTC Companies this loss can be offset against wages or other personal income for the year. It reduces the taxable income which reduces the amount of tax needed to pay. If a loss is made in a Trust or an Ordinary Company it stays in that entity and is able to be carried forward to next year to offset any profits. This means the loss can be used each year until all the losses are used up. The losses will keep carrying forward until they can be used, they don’t expire.