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  • Part A Losses carried forward to the 2009–10 income year - excludes film losses

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    There are certain tests that must be satisfied for the entity to be able to apply a loss or to carry forward a loss to a later income year. The entity must keep a record of its losses and account for any adjustments, including those made by the Tax Office. Records must be retained for at least five years from when they are prepared or from the completion of transactions to which they relate, whichever is later. To support claims for losses, records also should be retained at least until the end of the period of review for the income year in which the relevant losses are fully applied.

    If required the entity must be able to demonstrate not only the balance of any losses being either claimed or carried forward but also how those losses arose.

    1 Tax losses carried forward to later income years

    Complete B to G and U where appropriate; otherwise leave blank.

    Note

    • Do not include net capital losses or film losses at item 1.
    • Show net capital losses carried forward to later income years at item 2, and foreign source losses at Part E Foreign source losses. Details of film losses carried forward are not required to be reported on this schedule.
    • For the definition of a tax loss, see section 995-1External Link of the ITAA 1997.
    • Include foreign losses converted into tax losses under Subdivision 770-A of the Income Tax (Transitional Provisions) Act 1997 [IT(TP)A] that are carried forward to later income years. See Part E Foreign source losses.

    Subject to various rules, an earlier year tax loss is deducted in a later income year in the order in which it was incurred - to the extent that it has not already been deducted - as shown by the following formulas:

    a. Entities other than corporate tax entities

    If the entity has no net exempt income and has an excess of assessable income over total deductions - other than tax losses - deduct the tax loss from the excess assessable income. See subsection 36-15(2)External Link of the ITAA 1997.

    If the entity has net exempt income and an excess of assessable income over total deductions - other than tax losses - first deduct the tax loss from the net exempt income, then deduct any remaining amount of tax loss from the excess assessable income. See subsection 36-15(3)External Link of the ITAA 1997.

    If the entity has net exempt income and an excess of total deductions - other than tax losses - over assessable income, deduct the excess deductions from the net exempt income and then deduct the tax loss from any net exempt income that remains. See subsection 36-15(4)External Link of the ITAA 1997.

    b. Corporate tax entities

    If the entity has no net exempt income and has an excess of assessable income over total deductions - other than tax losses - deduct from that excess as much of the tax loss as the entity chooses. The entity may choose a nil amount. See subsection 36-17(2)External Link of the ITAA 1997.

    If the entity has net exempt income and an excess of assessable income over total deductions - other than tax losses - first deduct the tax loss from the net exempt income, then deduct from the part of the total assessable income that exceeds those deductions as much of the undeducted amount of the tax loss (if any) as the entity chooses. See subsection 36-17(3)External Link of the ITAA 1997.

    If the entity has net exempt income and an excess of total deductions - other than tax losses - over assessable income, deduct the excess deductions from the net exempt income and then deduct the tax loss from any net exempt income that remains. See subsection 36-17(4)External Link of the ITAA 1997. There is no choice available under this subsection.

    The choice that the corporate tax entity has under subsection 36-17(2) or (3) for the later income year is subject to certain limitations - see subsection 36-17(5)External Link.

    An entity's net exempt income is calculated in accordance with section 36-20 of the ITAA 1997.

    This amount is not necessarily the same as the amount shown at V Exempt income item 7 on the Company tax return 2009.

    For more information, see the information on:

    How to deduct a converted foreign loss in Part E Foreign source losses.

    Note: An earlier year tax loss may be reduced by the commercial debt forgiveness provisions of Schedule 2C to the ITAA 1936.

    Pooled development fund (PDF) tax losses are excluded from B to G and U. For more information on deductibility of PDF tax losses, see Division 195External Link of the ITAA 1997.

    Net capital losses may only be applied in accordance with Division 102 of the ITAA 1997. A CGT schedule may need to be completed. For more information, see the Guide to capital gains tax 2009 (NAT 4151).

    Year of loss 2008–09

    Show at B the unapplied amount of the tax loss incurred by the entity in the 2008–09 income year and carried forward to later income years under section 36-15 or section 36-17 (as applicable) of the ITAA 1997.

    If there is no 2008–09 tax loss carried forward to the 2009–10 income year, leave blank.

    Year of loss 2007–08

    Show at C the unapplied amount of the tax loss incurred by the entity in the 2007–08 income year and carried forward to later income years under section 36-15 or section 36-17 (as applicable).

    If no tax loss was incurred in the 2007–08 income year, or if the tax loss incurred in that year has been applied in full, leave blank.

    Year of loss 2006–07

    Show at D the unapplied amount of the tax loss incurred by the entity in the 2006–07 income year and carried forward to later income years under section 36-15 or section 36-17.

    If no tax loss was incurred in the 2006–07 income year, or if the tax loss incurred in that year has been applied in full, leave blank.

    Year of loss 2005–06

    Show at E the unapplied amount of the tax loss incurred by the entity in the 2005–06 income year and carried forward to later income years under section 36-15 or section 36-17.

    If no tax loss was incurred in the 2005–06 income year, or if the tax loss incurred in that year has been applied in full, leave blank.

    Year of loss 2004–05

    Show at F the unapplied amount of the tax loss incurred by the entity in the 2004–05 income year and carried forward to later income years under section 36-15 or section 36-17.

    If no tax loss was incurred in the 2004–05 income year, or if the tax loss incurred in that year has been applied in full, leave blank.

    Year of loss 2003–04 and earlier income years

    Show at G the total amount of unapplied tax losses incurred by the entity in the 2003–04 and all earlier income years where those losses are available to be carried forward to later income years.

    If no tax losses were incurred in the 2003–04 and all earlier income years, or if tax losses incurred in those years have been applied in full, leave blank.

    Total

    Show at U the total of tax losses carried forward to the 2009–10 income year. This amount is the total of the amounts shown at B to G.

    Transfer the amount at U to the Tax losses carried forward to later income years label on your tax return.

    For more information on how this amount is calculated, see the information on U Tax losses carried forward to later income years item 12 in the Company tax return instructions 2009.

     

    Note: Examples for part A items 1 and 2

    The examples are intended to be a guide only and represent some of the many possible methods of calculating the amount of losses available to be applied or carried forward to later income years.

    The examples apply equally to companies, trusts and funds, with the exception that trusts and funds are not able to transfer losses to other entities, nor are they able to have losses transferred to them. Furthermore, note that the transfer of losses provisions have been amended and are now limited to transfers involving an Australian branch of a foreign bank. See section 170-30External Link of the ITAA 1997.

    In all examples, it is assumed that the entity passes all tests, at all times, for that entity to be eligible to apply these losses.

    Example 1

    A company's trading results for the 2001–02 to 2008–09 income years and movement in the balances of its tax losses are as follows:

    Year

    Tax loss incurred

    Net exempt income

    Tax loss deducted

    Tax loss transferred

    Balance of tax loss

    2001–02

    $10,000

    -

    -

    -

    $10,000

    2002–03

    $30,000

    -

    -

    $4,000

    $36,000

    2003–04

    $20,000

    -

    -

    -

    $56,000

    2004–05

    -

    $1,000

    $2,000

    -

    $53,000

    2005–06

    -

    $500

    -

    -

    $52,500

    2006–07

    $6,000

    -

    -

    -

    $58,500

    2007–08

    $1,000

    $600

    -

    -

    $58,900

    2008–09

    -

    -

    $5,000

    -

    $53,900

    The company's loss calculation sheet shows the following progressive balances of tax losses for the income years following the 2001–02 income year as follows:

    Balance of losses

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2003–04 and earlier income years

    $10,000

    $36,000

    $56,000

    $53,000

    $52,500

    $52,500

    $52,500

    $47,500

    2004–05

    -

    -

    -

    -

    -

    -

    -

    -

    2005–06

    -

    -

    -

    -

    -

    -

    -

    -

    2006–07

    -

    -

    -

    -

    -

    $6,000

    $6,000

    $6,000

    2007–08

    -

    -

    -

    -

    -

    -

    $400

    $400

    2008–09

    -

    -

    -

    -

    -

    -

    -

    -

    TOTAL

    $10,000

    $36,000

    $56,000

    $53,000

    $52,500

    $58,500

    $58,900

    $53,900

    Complete part A item 1 as follows:

    Part A item 1: Year of loss
Label B 2008-09: nil
Label C 2007-08: $400
Label D 2006-07: $6,000
Label E 2005-06: nil
Label F 2004-05: nil
Label G 2003-04 and earlier income years: $47,500
Label U Total: $53,900

    Transfer the amount at U ($53,900) to the Tax losses carried forward to later income years label on your tax return.

    End of example
    Last modified: 27 Nov 2009QC 21731