Page 4 of the schedule
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Part E Controlled foreign company losses
A CFC is no longer required to quarantine revenue losses into separate classes of notional assessable income. However, CFC losses continue to be quarantined in the CFC that incurred them.
The amounts shown at N, O and P are the totals of the head company's share of losses incurred by CFCs. The head company's share of a loss of a CFC is calculated by applying its attribution percentage in the CFC to the loss of the CFC.
Current Year CFC Losses
Write at N the total amount of the head company's share of current CFC losses for a statutory accounting period that ends within the 2013–14 income year.
CFC losses deducted
Write at O the total of the head company's share of CFC losses deducted for a statutory accounting period that ends within the 2013–14 income year.
CFC losses carried forward
Write at P the total amount of the head company's share of CFC losses, if any, that is available to be carried forward to statutory accounting periods that end in later income years.
Part F Tax losses reconciliation for consolidated groups
This part requires you to reconcile the company's tax losses brought forward from the prior income year with those tax losses carried forward to later income years.
Do not include net capital losses or film losses at this item.
Balance of tax losses brought forward from prior income year
Write at A the amount of tax losses incurred by the company that have not been utilised and brought forward to the 2013–14 income year under section 36-17 of the ITAA 1997. The balance of losses brought forward from prior income years includes tax losses that have not been utilised remaining within a bundle of losses; that is, tax losses transferred in a prior income year under Subdivision 707-A (including those with a nil available fraction).
Uplift of tax losses of designated infrastructure project entities
A company, including the head company of a consolidated group, 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 a head company 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.
When an entity joins a consolidated group, the part of the income year that ends just before the entity joins (the non-membership period) is usually treated as a whole income year (paragraph 701-30(3)(a) of the ITAA 1997). However, this is disregarded for the purpose of calculating the uplift amount so that a joining entity cannot get a full year’s uplift for only part of an income year. Instead, the joining entity must pro rata the uplift as though it was only a DIP entity for that part (the non-membership period) of the income year (subsection 415-15(4) of the ITAA 1997).
Usually, losses transferred from a joining entity to a head company are treated as being incurred by the head company in the transfer year (section 707-140 of the ITAA 1997). If this section applied, then the head company would not be able to uplift losses in the transfer year even though the joining entity would have been able to uplift them if it had not joined the consolidated group. To avoid that, the provisions allow the head company to treat tax losses transferred from the joining entity as prior year losses (paragraph 415-15(5)(a) of the ITAA 1997).
However, the head company must also apportion the uplift so that the transferred loss is only uplifted for the part of the income year after the transfer occurs (paragraph 415-15(5)(b) of the ITAA 1997).
The tax losses will continue being uplifted in future income years until the head company either fully deducts them or stops being a DIP entity. A head company 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 head company 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 transferred from joining entities under Subdivision 707-A
Write at C the amount of tax losses transferred from joining entities to the head company during the 2013–14 income year.
Tax losses transferred from joining entities in prior years are included at A Balance of tax losses brought forward from the prior income year.
Transferred tax losses with a nil available fraction that have been applied
Losses transferred to the head company of a consolidated group or a multiple entry consolidated group by a joining entity that is insolvent at the joining time can be utilised by the head company in certain circumstances. If relevant conditions are met, the head company can apply transferred losses with a nil available fraction to reduce a net forgiven amount under the commercial debt forgiveness rules, reduce a capital allowance adjusted under the limited recourse debt rules, and reduce the capital gain that arises under CGT event L5 when the joining entity subsequently leaves the group.
See section 707-415 of the ITAA 1997.
Write at L the amount of tax losses with a nil available fraction that have been applied to reduce:
- a net forgiven amount under the commercial debt forgiveness rules
- a capital allowance adjusted under the limited recourse debt rules, or
- the capital gain that arises under CGT event L5 when the joining entity subsequently leaves the group.
Net forgiven amount of debt
Tax losses brought forward and losses transferred from joining entities are reduced by any commercial debt forgiveness amounts, see Division 245 of the ITAA 1997. If a commercial debt owed by the company is forgiven during the income year, apply in the following order the net amount of debts forgiven to reduce the company's deductible revenue losses, net capital losses, certain undeducted revenue or capital expenditure, and the cost bases of CGT assets.
A transferred loss with a nil available fraction can be used in certain circumstances by the head company of a consolidated group to reduce a net forgiven amount under the commercial debt forgiveness rules; see section 707-415 of the ITAA 1997.
Write at D the total net forgiven amount applied to reduce tax losses (if any) incurred in years of income before the forgiveness year of income or to reduce tax losses transferred under Subdivision 707-A from joining entities in the current year.
Tax loss incurred (if any) during current income year
Write at E the company's tax loss for the year, disregarding net exempt income and excess franking offsets.
There is a limit on the total of the amount you can deduct in the income year for gifts and contributions, see section 26-55 of the ITAA 1997. Deductions for gifts or contributions allowable under Division 30 of the ITAA 1997 cannot produce or increase a tax loss.
Tax losses carried back
Write at M the amount recorded at W item 13 on the Company tax return.
If you have deducted current net exempt income at W item 13 on the Company tax return, do not include this amount at F below.
Tax loss amount from conversion of excess franking offsets
If the company 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.
Write at F the amount of this tax loss.
Net exempt income
Write at G the amount of net exempt income to be taken into account in calculating the company's tax loss or carried forward tax loss.
You are required to first deduct a prior year tax loss from any net exempt income in the later income year.
If the entity has net exempt income and assessable income exceeds allowable deductions (other than the tax loss), the prior year tax loss has to be first deducted against net exempt income. Only then can the entity deduct so much of the undeducted amount of the prior year tax loss (if any remains) that it chooses, subject to certain limitations; see subsections 36-17(3) and (5) of the ITAA 1997.
Conversely, if the entity has allowable deductions (other than the tax loss) that exceed assessable income, the excess deductions must be applied against net exempt income first, and then the prior year tax loss must be applied against any remaining net exempt income; see subsection 36-17(4) of the ITAA 1997.
If the entity has net exempt income because it has a Shipping Exempt Income Certificate under the Shipping Reform (Tax Incentives) Act 2012 for any part of the current income year, a modified loss wastage rule will disregard 90 percent of the shipping net exempt income when calculating or deducting tax losses; see subsections 36-10(5) and 36-17(4A).
Exclude that part of net exempt income for which an amount of a tax loss could not be deducted due to a deduction limit. A deduction limit can apply to a transferred tax loss whose deduction is subject to an available fraction of less than 1.
If you have claimed a loss carry back tax offset and have deducted current net exempt income at W item 13 on the Company tax return, do not include this amount at this label.
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Tax losses cancelled or forgone
Write at H the amount of tax losses cancelled under section 719-325 of the ITAA 1997, or any losses that will not be deducted in any later income year.
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 same business test by carrying on the same business, entering into no new kinds of transactions and conducting no new kinds of business; see Subdivision 165-A of the ITAA 1997.
Tax losses deducted
Write at I tax losses deducted during the income year under section 36-17 of the ITAA 1997.
Tax losses transferred out under subdivision 170-A
Write at J the amount of tax losses transferred out by the company to group companies under Subdivision 170-A of the ITAA 1997.
Total tax losses carried forward to later income years
Write at K the total of tax losses carried forward to later income years.
If you do not lodge the schedule with the tax return, you must sign and date the schedule.
Last modified: 30 Oct 2014QC 40265