Income Tax Assessment Act 1997
A *tax offset that you have carried forward decreases the amount of income tax that you would otherwise have to pay under section 4-10 in a later income year. 65-35(2)
You apply a *tax offset that is carried forward to a later year in accordance with the priorities set out in Division 63 as if it were a tax offset for that later year.
Before you apply a *tax offset to reduce the amount of income tax that you pay in a later income year in which you have a taxable income, you must apply it to reduce to nil any *net exempt income for:
(a) that later income year; or
(b) any income year after the year in which the tax offset arose and before the later income year in which you had a taxable income but did not apply the tax offset to reduce the amount of income tax you had to pay.
Paragraph (b) would apply to cases such as where your taxable income was below your tax-free threshold or where you had other tax offsets that reduced your income tax to nil.
In reducing *net exempt income for an income year under subsection (3):
(a) if you were a base rate entity (within the meaning of the Income Tax Rates Act 1986 ) for the year - each 26 cents of *tax offset reduces the net exempt income by $1; or
(b) otherwise - each 30 cents of tax offset reduces the net exempt income by $1.
[ CCH Note: S 65-35(3A) will be amended by No 41 of 2017 (as amended by No 134 of 2018), s 3 and Sch 5 item 22, by substituting " 25 " for " 26 " in para (a), effective 1 July 2021.]
You can only apply a *tax offset that you have carried forward to the extent that it has not already been applied.
Section 65-40 contains special restrictions on applying carried forward tax offsets.