How is the sometimes exempt income loss worked out?



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The sometimes exempt income loss is worked out by:

  • assuming that the CFC had passed the active income test and did not have the benefit of the de minimis exemption
  • working out the amounts that would be included in the notional assessable income - called the sometimes exempt income
  • working out notional allowable deductions that would be available if the sometimes exempt income were assessable - called sometimes exempt deductions.

If sometimes exempt deductions of a class of income are more than the sometimes exempt income of that class, the difference is a sometimes exempt income loss.

Deductions for previous year losses

You may claim a notional allowable deduction for a CFC's previous years' losses. Do this separately for each class of income. In determining the loss for a particular class of notional assessable income, only the notional allowable deductions that relate to that particular class and were derived in that period are taken into account. If the notional allowable deductions are more than the notional assessable income, the difference is set off against the sometimes exempt income gain of that class for the period. The amount that remains is the CFC's loss for that class for the period.

Last modified: 05 Dec 2006QC 18000