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  • PAYG instalments and prior year losses for companies

    If you're a corporate tax entity (such as a company) that made a tax loss in any year, you can choose:

    • how much of your tax loss to carry forward
    • when to deduct the loss.

    If you apply a loss over subsequent years, it will affect your pay as you go (PAYG) instalment rate.

    On this page:

    Calculating your PAYG instalment rate

    We calculate your PAYG instalment rate based on your:

    • estimated (or notional) tax – this is the business and investment income reported on your most recently lodged tax return, to which current income tax rates are applied
    • taxable income – this is adjusted to exclude
      • net capital gains (except if you're a superannuation fund, approved deposit fund or pooled superannuation trust)
      • deductions other than tax losses
      • tax losses carried forward to the next income year.

    Carry forward only part of tax loss

    If you're a company and carry forward part of your tax loss in your most recently lodged tax return, we will adjust your taxable income by excluding the lesser of the:

    • tax loss deducted in the most recently lodged tax return
    • amount of any tax loss carried forward to the next income year.

    Carry forward loss is greater than tax losses deducted

    If the amount of tax loss you carried forward to use in future returns is more than the tax loss you claimed as a deduction in your most recently lodged tax return, we will use the loss you claimed as a deduction when we work out the adjusted taxable income from which we calculate your instalment rate.

    Example: Remaining carried forward loss is more than the tax loss deducted

    AJ Pty Ltd has assessable income of $100,000, deductions of $30,000 and a carry forward loss of $10,000. AJ has chosen to deduct $4,000 in their current tax return and carry forward a tax loss of $6,000 to the next year ($10,000 minus $4,000).

    Their tax loss deduction in the current tax return ($4,000) is less than the carry forward tax loss ($6,000).

    Therefore, their adjusted taxable income (which is used to calculate AJ's PAYG instalment rate) is:

    Assessable income

    $100,000

    minus Deductions

    $30,000

    minus Amount of deduction for tax loss

    $4,000

    equals Taxable income (adjusted)

    $66,000

     

    End of example

    Carry forward loss is less than tax loss

    If the loss you carried forward to the next income year is less than the amount of the loss deducted in your most recently lodged tax return, we will use the carried forward loss when we work out the adjusted taxable income from which we calculate your instalment rate.

    Example: Remaining carried forward loss is less than the amount of loss deducted

    AJ Pty Ltd has assessable income of $100,000, deductions of $30,000, and a carried forward loss of $10,000. AJ claims $7,000 of this loss as a deduction in their current tax return.

    The amount of the tax loss to be carried forward ($3,000) is less than the loss deducted in this tax return ($7,000).

    Therefore, their adjusted taxable income (which is used to calculate AJ's PAYG instalment rate) is:

    Assessable income

    $100,000

    minus Deductions

    $30,000

    minus Amount of tax loss carried forward to the next year

    $3,000

    Equals Taxable income (adjusted)

    $67,000

     

    End of example

    See also:

      Last modified: 25 Jul 2019QC 17718