Item 7 Reconciliation to taxable income or loss

37432 Reconcl to tax income or oss

'Item 7 Reconciliation to taxable income or loss' label from Company tax return 2014

Item 7 deals with adjustments for tax purposes to reconcile accounting total profit or loss to the taxable income or loss.

Common errors: amounts incorrectly shown

Various errors are made in item 7, including:

  • the incorrect use of labels to report revenue and
  • expenses relating to mutual dealings with members.

Consequence of these errors

Errors in item 7 could lead to your organisation:

  • paying an incorrect amount of tax
  • being inappropriately selected for audit.


  • W Non-deductible expenses    
    • W Non-deductible expenses includes amounts that are expenses for accounting purposes but are not deductible for income tax purposes, including timing variations.
    • Expenses relating to mutual dealings with members are included at W.
    • W excludes any amount included at U Non-deductible exempt income expenditure item 7.
  • Depreciation/decline in value  
    • Depreciation for accounting purposes is included at W. This is also the amount entered at X Depreciation expenses item 6.
    • Enter the tax-deductible amount of decline in value at F Deduction for decline in value of depreciating assets item 7.
  • V Exempt income    
    • Write at V all income that is exempt from Australian tax. Do not include at V amounts that are not assessable income and not exempt income.
    • Do not include mutual receipts at V Exempt income. Include these amounts at Q Other income not included in assessable income.
  • Q Other income not included in assessable income    
    • Q includes amounts that are income for accounting purposes but not assessable for income tax.
    • Mutual receipts are included at Q.

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Last modified: 20 Jul 2015QC 40743