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M Tax losses deducted

Last updated 28 July 2020

Show at M the tax losses that the fund is claiming. The fund can claim tax losses only to the extent that its total assessable income exceeds total deductions (other than tax losses).

The amount of the fund's tax losses brought forward must first be deducted from the amount of the fund's net exempt income (section 36-15 of the ITAA 1997). The fund's net exempt income is the fund's gross exempt income less the expenses incurred in deriving that income. Example 4c illustrates the effect of exempt current pension income on tax losses.

In calculating the tax losses, take into account the foreign loss component of a tax loss only to the extent that it is deductible in the 2008-09 income year. In previous years, foreign losses were quarantined from domestic assessable income, and therefore could not be taken into account in the deduction of tax losses. From a fund's first income year starting on or after 1 July 2008, foreign losses are no longer quarantined from domestic assessable income. Subject to certain restrictions, foreign losses carried forward from earlier income years are added to other tax losses incurred in those years. However, there are also restrictions limiting the amount of the foreign loss component of any tax loss that can be deducted in the 2008-09 income year and the following three income years.

See Subdivision 770-A Transitional foreign losses (common rules) of the Income Tax (Transitional Provisions) Act 1997.

For more information about the treatment of foreign losses carried forward from earlier years, see Losses schedule instructions 2009.

Tax losses are not the same as 'capital losses' which may result from a capital gains tax event. Do not show net capital losses at M. See V Net capital losses carried forward to later income years at item 13.

The trust loss legislation in Schedule 2F to the ITAA 1936 affects the deductibility of prior year losses by all trusts which are not excepted trusts (as defined in section 272-100 of Schedule 2F to the ITAA 1936), such as non-complying superannuation funds.

The fund may need to complete and attach a Losses schedule 2009 to its tax return - see Schedules and the Losses schedule instructions 2009.