Part F Tax losses reconciliation statement
This part requires you to reconcile the entity's tax losses brought forward from the prior income year with those carried forward to later income years.
Do not include net capital losses or film losses at this item.
Balance of tax losses brought forward from prior year
Write at A the undeducted and not transferred amount of tax losses incurred by the entity and brought forward to the 2011-12 income year under section 36-17 of the ITAA 1997.
Net forgiven amount of debt
Tax losses brought forward are reduced by any commercial debt forgiveness amounts (Division 245 of the ITAA 1936). If a commercial debt owed by the entity is forgiven during the income year, then you should apply, in the following order, the net amount of debts forgiven to reduce the entity's deductible revenue losses, net capital losses, certain undeducted revenue or capital expenditure, and the cost base of CGT assets.
Write at C the total net forgiven amount applied to reduce tax losses (if any) incurred in years of income before the forgiveness year of income.
Tax loss incurred (if any) during current income year
Write at D the entity's tax loss for the year disregarding net exempt income and excess franking offsets.
There is a limit on the total of the amount you can deduct for the income year for gifts and contributions (section 26-55 of the ITAA 1997). A tax loss cannot be produced or increased by the deduction allowable under Division 30 of the ITAA 1997, which is about deductions for gifts or contributions.
Tax loss amount from conversion of excess franking offsets
If the entity has excess franking offsets, it must convert the excess franking offsets into an amount of tax loss to carry forward to later income years. You convert the amount of excess franking offsets into a tax loss by dividing the excess franking offsets amount by the corporate tax rate, which gives you the tax loss amount. You record the amount of this tax loss at E.
Net exempt income
Write at F the amount of net exempt income to be taken into account in calculating the entity's tax loss or carried forward tax loss.
You are required to first deduct a prior year tax loss from any net exempt income in the later income year.
If the entity has net exempt income and assessable income that exceeds the allowable deductions (other than the tax loss), the tax loss has to be first applied against net exempt income. The entity can then deduct so much of the remaining amount of the tax loss (if any) as it chooses, subject to certain limitations - see subsections 36-17(3) and (5) of the ITAA 1997.
However, if the entity has net exempt income and the allowable deductions (other than the tax loss) exceed the entity's total assessable income, the excess deductions over total assessable income must be applied against net exempt income first. The prior year tax loss must then be applied against any remaining net exempt income - see subsection 36-17(4) of the ITAA 1997.
Tax losses forgone
Write at G the amount of tax losses that have been forgone by the entity - that is, tax losses that will not be deducted in any later income year.
An entity cannot deduct a tax loss unless:
- it has the same owners and the same control throughout the period from the start of the loss year to the end of the income year, or
- it satisfies the same business test by carrying on the same business, entering into no new kinds of transactions and conducting no new kinds of business - see Subdivision 165-A of the ITAA 1997.
Tax losses deducted
Write at H tax losses (including foreign loss component of tax losses) deducted during the income year under section 36-17 of the ITAA 1997.
Tax losses transferred out under Subdivision 170-A
Write at I the amount of tax losses transferred out by the company to group companies under Subdivision 170-A of the ITAA 1997.
Total tax losses carried forward to later income years
Write at J the total of tax losses carried forward to later income years.