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.
Write at A the undeducted and not transferred amount of tax losses incurred by the entity and brought forward to 2020–21 under section 36-15 or section 36-17 (as applicable) of the ITAA 1997.
Any amount used as a loss carry back in the 2021 Company tax return will be subtracted at H –Tax losses deducted.
A company or a fixed trust that is a designated infrastructure project (DIP) entity in an income year is able to uplift its unutilised tax losses before deducting them. The tax losses are uplifted by the income year’s long-term bond rate, which is the year’s average yield for 10-year non-rebate Australian Treasury bonds.
To be eligible for the uplift:
- the project that you are undertaking must be designated, and
- you must notify the Commissioner that you are a DIP entity.
If an entity is a DIP entity only for part of an income year in which the uplift occurs, the uplift is apportioned according to the number of days in the income year for which it was such an entity.
The tax losses will continue being uplifted in future income years until the entity either fully deducts them or stops being a DIP entity. An entity will cease to be a DIP entity and therefore not be able to uplift its tax losses when it stops carrying on the DIP or if it engages in activities that are not for the purpose of the DIP.
For more information, see Designated infrastructure project entities.
If the entity is a DIP entity, write at B the amount of the uplift of tax losses as determined under Division 415 of the ITAA 1997.
Tax losses brought forward are reduced by any commercial debt forgiveness amounts (Division 245 of the ITAA 1997). If a commercial debt owed by the entity is forgiven during the income year, then you should apply the net forgiven amount to reduce the following attributes of the entity in the order listed:
- deductible revenue losses
- net capital losses
- certain undeducted revenue or capital expenditure, and then
- 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.
Write at D the entity's tax loss for 2020–21 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.
If the entity is a corporate tax entity and 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.
Write at F the amount of net exempt income for 2020–21 to be taken into account in calculating the entity's tax loss or carried forward tax loss.
Since 1 March 2019, a more flexible 'similar business test' supplements the 'same business test' for company losses. The 'same business test' and the 'similar business test' are collectively known as the 'business continuity test'.
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.
For example, a company 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 business continuity test by carrying on the same or a similar business, and satisfies the four factors in subsection 165-211; see Subdivision 165-A and subsection 165-211 of the ITAA 1997.
In addition, where all or part of a tax loss of a company is cancelled because the company has created exploration credits under Division 418 of the ITAA 1997 (the Exploration Development Incentive or Junior Minerals Exploration Incentive, the amount of the tax loss that has been cancelled must be included in the amount at G.
Write at H the sum of:
- the tax losses deducted during 2020–21 under section 36-15 or section 36-17 (as applicable) of the ITAA 1997, and
- the total amount of losses carried back (the total amount recorded at A to C item 13 on the Company tax return) if not already included in the amount deducted under section 36-17 of the ITAA 1997.
I Tax losses transferred out under Subdivision 170-A (only for transfers involving a foreign bank branch or a PE of a foreign financial entity)
If the entity is a company, write at I the amount of tax losses transferred out by the company to group companies under Subdivision 170-A of the ITAA 1997.
The amount at J should be the same as the amount you calculated at U in Part A. Write at J the total of tax losses carried forward to later income years.