• 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