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Item 7 Reconciliation to taxable income or loss
Item 7 deals with adjustments for tax purposes to reconcile accounting total profit or loss to the taxable income or loss.
Common errors: amounts incorrectly shown
Various errors are made in item 7, including the incorrect use of labels to report revenue and expenses relating to mutual dealings with members.
Consequence of these errors
Errors in item 7 could lead to:
- you paying an incorrect amount of tax
- incorrect targeting of audits.
Tips
W Non-deductible expenses
W Non-deductible expenses includes amounts that are expenses for accounting purposes but are not deductible for income tax purposes, including timing variations.
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Expenses relating to mutual dealings with members are included at W.
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W excludes any amount included at U Non-deductible exempt income expenditure item 7.
Depreciation / decline in value
Depreciation for accounting purposes is included at W. This is also the amount entered at X Depreciation expenses item 6.
Enter the tax-deductible amount of decline in value at F Deduction for decline in value of depreciating assets item 7.
V Exempt income
Write at V all income that is exempt from Australian tax. Do not include at V amounts that are not assessable income and not exempt income.
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Do not include mutual receipts at V Exempt income. Include these amounts at Q Other income not included in assessable income.
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Q Other income not included in assessable income
Q includes amounts that are income for accounting purposes but not assessable for income tax.
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Mutual receipts are included at Q.
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For more information on mutual receipts, refer to Non-assessable income in our guide Mutuality and taxable income.
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Sections within Completing the company tax return
Last Modified: Thursday, 30 June 2011