The new tax measure will start in July this year and is expected to save more than $700 million over the next four years.

The new tax measure is being introduced to ensure excess deductions from unprofitable business activities cannot be used to reduce salary and wage income of high income earners.

Taxpayers with an adjusted taxable income over $250,000 will instead have excess deductions quarantined to the business activity.

The existing rules will continue to apply to taxpayers with an adjusted taxable income of $250,000 or less.

The new test for taxpayers with an adjusted income above $250,000 will restrict the ability of those taxpayers to claim losses for non-commercial activities that are more likely to be in the nature of lifestyle choices of hobbies.

Taxpayers will still have the ability to apply to the Commissioner of Taxation for relief from the rules if there are exceptional circumstances or because the nature of the activities means that a taxpayer is temporarily carrying on an uncommercial business but the activities they are undertaking are nonetheless independently assessed as commercially viable.