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 ATO.
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.
Do not include net capital losses or film losses at item 1.
Write net capital losses carried forward to later income years at item 2.
Details of film losses carried forward are not required to be reported on this schedule.
For the definition of a tax loss, see section 995-1 of the ITAA 1997.
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 utilised).
For more information about deducting and carried forward losses, see Losses.
An earlier year tax loss may be reduced by the commercial debt forgiveness provisions of Division 245 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 Guide to capital gains tax 2021 (NAT 4151).
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 195 of the ITAA 1997.
If you choose to carry back some or all of your tax losses (item 13 Losses information, A, B and C in the Company tax return), this amount cannot be carried forward.
Year of loss
At the appropriate year, write the unutilised amount of the tax loss incurred by the entity in that year and carried forward to later income years under section 36-15 or section 36-17 (as applicable) of the ITAA 1997. The amount at B must be reduced by the amount of any losses carried back shown at B and C at 13 Losses information in the Company tax return. The amount at C must be reduced by the amount of any losses carried back at A at 13 Losses information in the Company tax return.
For 2014–15 and earlier income years, write the total amount for those years.
If no tax loss was incurred in a particular year, or if the tax loss incurred in that year has been applied in full, leave blank.
U Total
Write at U the total of tax losses carried forward to later income years; this amount is the total of the amounts 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 Tax losses carried forward to later income years under 13 Losses information in the relevant instructions.
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. The transfer of losses provisions are limited to transfers involving an Australian branch of a foreign bank; see section 170-30 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 and movement in the balances of its tax losses are as follows:Year |
Tax loss incurred |
Net exempt income |
Tax loss deducted |
Balance of tax loss |
|---|---|---|---|---|
2013–14 |
10,000 |
4,000 |
0 |
6,000 |
2014–15 |
30,000 |
0 |
0 |
36,000 |
2015–16 |
20,000 |
0 |
0 |
56,000 |
2016–17 |
0 |
1,000 |
2,000 |
53,000 |
2017–18 |
0 |
500 |
0 |
52,500 |
2018–19 |
6,000 |
0 |
0 |
58,500 |
2019–20 |
1,000 |
600 |
0 |
58,900 |
2020–21 |
0 |
0 |
5,000 |
53,900 |
:
The company's loss calculation sheet shows progressive balances of tax losses as follows:Balance of losses |
2013–14 |
2014–15 |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
|---|---|---|---|---|---|---|---|---|
2015–16 and earlier income years |
6,000 |
36,000 |
56,000 |
53,000 |
52,500 |
52,500 |
52,500 |
47,500 |
2016–17 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
2017–18 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
2018–19 |
0 |
0 |
0 |
0 |
0 |
6,000 |
6,000 |
6,000 |
2019–20 |
0 |
0 |
0 |
0 |
0 |
0 |
400 |
400 |
2020–21 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Total |
6,000 |
36,000 |
56,000 |
53,000 |
52,500 |
58,500 |
58,900 |
53,900 |
Label |
Year of loss |
Amount |
|---|---|---|
B |
2020–21 |
0 |
C |
2019–20 |
400 |
D |
2018–19 |
6,000 |
E |
2017–18 |
0 |
F |
2016–17 |
0 |
G |
2015–16 and earlier income years |
47,500 |
U |
Total |
53,900 |
The company transfers the amount at U ($53,900) to U item 13 Tax losses carried forward to later income years on its Company tax return 2021.
End of example2 Net capital losses carried forward to later income years
Complete H to M and V where appropriate; otherwise, leave blank.
You must complete the details requested at this item if the entity has net capital losses carried forward to later income years.
The net capital losses of a company shown at H to M include any unapplied current year net capital loss calculated in accordance with Subdivision 165-CB of the ITAA 1997.
The entity may be required to complete a CGT schedule; see the Guide to capital gains tax 2021.
Year of loss
At the appropriate year, write the amount of any unapplied net capital loss made by the entity in that year that can be carried forward to later income years.
For 2015–16 and earlier income years, write the total amount for those years.
If there is no net capital loss for a particular year, or if the net capital loss made in that year has been applied in full, leave blank.
V Total
Write at V the total of unapplied net capital losses carried forward to later income years at H to M.
Transfer the amount at V to Net capital losses carried forward to later income years on your tax return.
Example 2
A company's results for 2015–16 to 2020–21 and movement in the balances of its net capital losses are as follows:Year |
Net capital loss incurred |
Net capital loss applied |
Balance of net capital losses |
|---|---|---|---|
2015–16 |
1,000 |
0 |
1,000 |
2016–17 |
9,000 |
0 |
10,000 |
2017–18 |
0 |
2,000 |
8,000 |
2018–19 |
8,000 |
0 |
16,000 |
2019–20 |
0 |
1,500 |
14,500 |
2020–21 |
1,000 |
0 |
15,500 |
Year |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
|---|---|---|---|---|---|---|
2015–16 |
1,000 |
1,000 |
0 |
0 |
0 |
0 |
2016–17 |
0 |
9,000 |
8,000 |
8,000 |
6,500 |
6,500 |
2017–18 |
0 |
0 |
0 |
0 |
0 |
0 |
2018–19 |
0 |
0 |
0 |
8,000 |
8,000 |
8,000 |
2019–20 |
0 |
0 |
0 |
0 |
0 |
0 |
2020–21 |
0 |
0 |
0 |
0 |
0 |
1,000 |
Total |
1,000 |
10,000 |
8,000 |
16,000 |
14,500 |
15,500 |
Label |
Year of loss |
Amount |
|---|---|---|
H |
2020–21 |
1,000 |
I |
2019–20 |
0 |
J |
2018–19 |
8,000 |
K |
2017–18 |
0 |
L |
2016–17 |
6,500 |
M |
2015–16 and earlier income years |
0 |
V |
Total |
15,500 |
The company transfers the amount at V ($15,500) to V item 13 Net capital losses carried forward to later income years on its Company tax return 2021.
End of examplePart B Ownership and business continuity test – company and listed widely held trust only
The 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.
See also:
- LCR 2019/1 The business continuity test – carrying on a similar business
1 Whether continuity of majority ownership test passed
If the entity has deducted or applied (or, if applicable, transferred in or transferred out) a loss, which was incurred in any of the listed years, print X in the appropriate boxes to indicate whether the entity has satisfied the continuity of majority ownership test in respect of that loss.
The aim of item 1 is to find out if:
- the continuity of majority ownership test at section 165-12 of the ITAA 1997 if the entity is a company, or
- the 50% stake test at Subdivision 269-C of Schedule 2F to the ITAA 1936 if the entity is a listed widely held trust
has been satisfied in respect of a loss if a loss in any of the periods listed at item 1 is deducted or applied, if the entity is a company or listed widely held trust.
For more information regarding the operation of the loss rules, see Losses.
Year of loss
Print X in the Yes boxes at A to F (as applicable) if, during 2020–21, the entity seeks to deduct or apply a loss of the relevant year and the entity has passed:
- the continuity of majority ownership test, if the entity is a company, or
- the 50% stake test, if the entity is a listed widely held trust in respect of the loss of that particular year.
Print X in the No boxes at A to F (as applicable) for each year in respect of which the entity seeks to deduct or apply a loss, if the continuity of majority ownership test or the 50% stake test, as applicable, has not been satisfied in respect of that loss and the entity is required to satisfy the business continuity test.
If there was no loss deducted or applied (or, if applicable, not transferred in or transferred out) in respect of a particular year, leave the boxes next to that year blank.
Examples for part B item 1
Although examples 3 and 4 are for companies, the examples, notes and comments apply equally to listed widely held trusts (which must satisfy the 50% stake test).
Example 3
A company had incurred tax losses in earlier income years. The company deducted all of these tax losses in respect of 2020–21. At the beginning of 2020–21, the company had undeducted losses from 2015–16, 2017–18, 2018–19 and 2019–20. The continuity of majority ownership test was failed during 2017–18 but all other tests for allowing the tax losses to be deducted have been passed by the company.
On these facts, for the tax losses of 2017–18 and earlier income years, the company has not passed the continuity of majority ownership test.
Year of loss |
Label |
Yes |
No |
|---|---|---|---|
2020–21 |
A |
- |
- |
2019–20 |
B |
X |
- |
2018–19 |
C |
X |
- |
2017–18 |
D |
- |
X |
2016–17 |
E |
- |
- |
2015–16 and earlier income years |
F |
- |
X |
The above example shows that:
- the company failed the continuity of majority ownership test for the tax losses of 2015–16 (and earlier income years) and 2017–18. There was no deduction for a tax loss in 2016–17
- the company passed the continuity of majority ownership test for the tax losses of 2018–19 and 2019–20.
Example 4
A company that incurred a tax loss in 2015–16 subsequently undergoes a change in majority ownership in 2016–17. The company satisfies the business continuity test in respect of the 2015–16 tax loss.
The company incurs a further tax loss in 2017–18 and satisfies the continuity of majority ownership test in respect of this 2017–18 tax loss.
In 2020–21, the company deducts the tax losses incurred in 2015–16 and 2017–18.
Print X in the Yes box at D 2017–18 and X in the No box at F 2015–16 and earlier income years.
End of example2 Amount of losses deducted/applied for which the continuity of majority ownership test is not passed but the business continuity test is satisfied – excludes film losses
The 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.
See also:
- LCR 2019/1 The business continuity test – carrying on a similar business
Write at item 2 the total amount of losses deducted or applied during 2020–21 (if the entity is either a company or a listed widely held trust) for which the business continuity test must be satisfied.
In addition to those companies with either tax losses or net capital losses that have not passed the continuity of majority ownership test, this item also applies to listed widely held trusts with tax losses that have not passed the 50% stake test.
For more information regarding the operation of the loss rules, see Losses.
G Tax losses
Write at G the amount of tax losses deducted by the entity that do not meet the continuity of majority ownership test but satisfy the business continuity test.
H Net capital losses
Write at H the amount of net capital losses applied by a company that do not meet the continuity of majority ownership test but satisfy the business continuity test.
Example 5
Year |
Tax loss |
Net capital loss |
|---|---|---|
2014–15 |
1,000 |
0 |
2015–16 |
2,000 |
0 |
2016–17 |
0 |
500 |
2017–18 |
1,600 |
800 |
2018–19 |
0 |
0 |
2019–20 |
10,000 |
2,000 |
2020–21 |
0 |
0 |
Total |
14,600 |
3,300 |
There was a change in the underlying beneficial ownership of the company in 2018–19.
The company passed the business continuity test and all other tests in relation to the losses incurred prior to that year and passed the continuity of majority ownership test and all other tests in relation to the 2019–20 losses.
Tax losses
All tax losses incurred in 2014–15, 2015–16 and 2017–18 were deducted in 2020–21, as well as $6,000 of the 2019–20 tax loss.
Net capital losses
All of the 2016–17 net capital loss and $600 of the 2017–18 net capital loss were applied in 2020–21.
Of all of the above losses, which are being applied in 2020–21, those which are subject to the business continuity test being satisfied by the company are as follows:
Tax losses
- 2014–15 ($1,000)
- 2015–16 ($2,000)
- 2017–18 ($1,600)
Net capital losses
- 2016–17 ($500)
- 2017–18 ($600)
Type of loss |
Label |
Amount |
|---|---|---|
Tax losses |
G |
4,600 |
Net capital losses |
H |
1,100 |
The 2019–20 tax loss of $6,000 was deducted by the company on the basis that the company had satisfied the continuity of majority ownership test. Therefore this amount is not shown at G Tax losses.
As $200 of the 2017–18 net capital loss was not applied during 2020–21, that amount of $200 is not shown at H Net capital losses for 2020–21 even though the business continuity test would need to be passed in a later income year in order for the company to be able to apply that net capital loss in a later income year.
End of example3 Losses carried forward for which the business continuity test must be satisfied before they can be deducted/applied in later years – excludes film losses
The 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.
See also:
- LCR 2019/1 The business continuity test – carrying on a similar business
Item 3 asks for information about the tax losses and net capital losses for which the entity must satisfy the business continuity test in subsequent years for the entity to be able to deduct or apply those losses.
I Tax losses
Write at I the total amount of tax losses carried forward to later income years for which the business continuity test must be satisfied for the entity to deduct those tax losses in later income years.
J Net capital losses
Write at J the total amount of net capital losses carried forward to later income years for which the business continuity test must be satisfied for the company to apply those net capital losses in later income years.
Example 6
Year |
Tax loss |
Net capital loss |
|---|---|---|
2014–15 |
1,500 |
0 |
2015–16 |
3,000 |
0 |
2016–17 |
0 |
700 |
2017–18 |
1,900 |
900 |
2018–19 |
0 |
0 |
2019–20 |
1,000 |
1,500 |
2020–21 |
0 |
0 |
Total |
7,400 |
3,100 |
A change in the underlying beneficial interests in the company took place during 2018–19. As a result, the company must satisfy the business continuity test for the tax losses and net capital losses.
As the similar business test has effect from 1 July 2015, applying the business continuity test means:
- the same business test for income years up to and including the 2014-15 year
- the same or similar business test for income years after and including 2015-16.
The 2019–20 tax loss ($1,000) and the net capital loss ($1,500) are not affected by the change in the underlying beneficial interest of the company.
Type of loss |
Label |
Amount |
|---|---|---|
Tax losses |
I |
6,400 |
Net capital losses |
J |
1,600 |
End of example
4 Do current year loss provisions apply?
Print X in the Yes box at K if the company is required to calculate its taxable income or tax loss under the provisions of Subdivision 165-B or its net capital gain or net capital loss under the provisions of Subdivision 165-CB.
Print X in the No box at K if the company is not required to calculate its taxable income or tax loss under the provisions of Subdivision 165-B or its net capital gain or net capital loss under the provisions of Subdivision 165-CB.
A company is required to calculate its taxable income and tax loss under Subdivision 165-B of the ITAA 1997 where it does not satisfy the continuity of majority ownership test for the whole income year; see section 165-35 of the ITAA 1997.
The current year loss provisions also apply where, during the income year, a person begins to control, or becomes able to control, the voting power in the company for the purpose or one of the purposes of gaining an advantage under the ITAA 1997 or gaining such a benefit for someone else; see section 165-40 of the ITAA 1997.
However, the current year loss rules do not apply in either case if the business continuity test is satisfied.
For more information on the application of these rules, see Current year CFC losses.