About worksheet 2
Worksheet 2 caters for those items that reconcile item 6 – label T Total profit or loss with item 7 – label T Taxable/net income or loss, other than those items specifically included in item 7.
Worksheet 2 doesn't contain an exhaustive list of reconciliation items. All references to accounts below are taken to mean the company’s profit and loss account.
Additions to item 6 – label T Total profit or loss not covered by item 7 – labels:
- A Net capital gain
- U Non-deductible exempt income expenditure
- J Franking credits
- C Australian franking credits from a New Zealand company
- E TOFA income from financial arrangements not included in item 6
- D Accounting expenditure in item 6 subject to R&D tax incentive.
These are specified under item 7 – labels B Other assessable income and W Non-deductible expenses.
Use Worksheet 2 to help calculate at item 7 the:
- total for income-related add-back items at label B Other assessable income
- total for expense-related add-back items at label W Non-deductible expenses.
Subtractions from item 6 – label T Total profit or loss not covered by item 7 – labels:
- C Section 46FA deductions for flow-on dividends
- F Deduction for decline in value of depreciating assets
- U Forestry management investment scheme deduction
- E Immediate deduction for capital expenditure
- H Deduction for project pool
- I Capital works deductions
- Z Section 40-880 deduction
- N Landcare operations and deductions for decline in value of water facility, fencing asset and fodder storage asset
- O Deduction for environmental protection expenses
- V Exempt income
- W TOFA deductions from financial arrangements not included at item 6
- J Small business skills and training boost
- K Small business energy incentive
- R Tax losses deducted
- S Tax losses transferred in (from or to a foreign bank branch or a PE of a foreign financial entity).
These are specified under item 7 – label Q Other income not included in assessable income and label X Other deductible expenses.
Use Worksheet 2 to help calculate the total for income-related subtraction items at label Q and the total for expense-related subtraction items at label X.
In some cases, a reconciliation adjustment at item 7 adds back or subtracts the whole of an amount shown at item 6 and a separate label at item 7 shows the amount for income tax purposes. For example, for companies not using the small business entity depreciation rules, depreciation as per the accounts is shown at item 6 and added back in full at item 7 – label W Non-deductible expenses. The deduction for the decline in value of depreciating assets is listed at item 7 – label F Deduction for decline in value of depreciating assets.
Worksheet 2
|
Description |
Amount |
|---|---|
|
Adjustments to income derived: increase in interest |
$ |
|
Adjustments to income derived: increase in dividends |
$ |
|
Adjustments to income derived: increase in partnership distributions |
$ |
|
Adjustments to income derived: increase in trust distributions |
$ |
|
Adjustments to income derived: year-end sales cut-off adjustment |
$ |
|
Assessable balancing adjustment amounts on depreciating assets, uplifted by the relevant portion |
$ |
|
Clawback amounts – additional assessable income (R&D) |
$ |
|
Attributed foreign income not included in accounts |
$ |
|
Bad debts recovered not included in accounts |
$ |
|
Benefits or prizes from investment-related lotteries not included in accounts |
$ |
|
$ |
|
|
Grants received not included in accounts |
$ |
|
Gross taxable foreign source income |
$ |
|
Inclusion in assessable income under the hybrid mismatch rules (see also Appendix 9). |
$ |
|
Other assessable income not included in accounts (former STS taxpayers should see Former STS taxpayers) |
$ |
|
Total |
$ |
|
Description |
Amount |
|---|---|
|
Amortisation as per accounts (including goodwill) |
$ |
|
Borrowing costs |
$ |
|
Capital items depreciated as repairs |
$ |
|
Depreciation expenses, item 6 – label X, (see Note 4 and Note 5) |
$ |
|
Entertainment expenses – to the extent to which they are not deductible |
$ |
|
Legal expenses and consultants’ fees – to the extent to which they are not deductible |
$ |
|
Subscriptions and donations – to the extent to which they are not deductible |
$ |
|
Bad debts – to the extent to which they are not deductible |
$ |
|
Part of prepaid expenses not deductible this year (see Note 1(a)) |
$ |
|
Travel expenses by spouse (of any sex) |
$ |
|
Expenses incurred in deriving non-assessable non-exempt income |
$ |
|
Certain expenses relating to PSI that are not deductible (see Note 4) |
$ |
|
Extraordinary loss per accounts |
$ |
|
Finance lease interest |
$ |
|
Foreign exchange accounting losses |
$ |
|
Foreign tax paid or deemed paid |
$ |
|
Debt deductions denied by thin capitalisation (see Appendix 6) |
$ |
|
Deductions denied under the hybrid mismatch rules (see Appendix 9) |
$ |
|
Loss on sale of depreciating assets included in accounts (exclude R&D assets see Note 3) |
$ |
|
Loss on sale of other assets included in accounts |
$ |
|
Luxury car lease payments (see Luxury car leases) |
$ |
|
Net adjustment to expenses claimed: decrease in consumable stores (see Note 2) |
$ |
|
Net increase in provisions |
$ |
|
Net increase in trading stock valuation for tax purposes |
$ |
|
Non-share dividends |
$ |
|
Other capital items included in accounts |
$ |
|
Penalties and fines |
$ |
|
Superannuation charged in accounts |
$ |
|
Trust losses deducted from accounting income |
$ |
|
Unrealised losses on revaluation of assets to fair value |
$ |
|
Total |
$ |
|
Description |
Amount |
|---|---|
|
Adjustments to income derived: decrease in interest |
$ |
|
Adjustments to income derived: decrease in dividends |
$ |
|
Adjustments to income derived: decrease in trust distributions |
$ |
|
Adjustments to income derived: year-end sales cut-off adjustment |
$ |
|
Extraordinary profits per accounts |
$ |
|
Forex accounting profits |
$ |
|
Foreign source income in the accounts that is not assessable income |
$ |
|
Grants receivable |
$ |
|
PSI included in the assessable income of an individual (attributed amount) |
$ |
|
$ |
|
|
Profit on sale of other assets included in accounts (including assets used for R&D) |
$ |
|
Unrealised gains on revaluation of assets to fair value |
$ |
|
Other income amounts in the accounts that are not assessable income |
$ |
|
Total |
$ |
|
Description |
Amount |
|---|---|
|
Allowable superannuation fund payments |
$ |
|
Capital expenditure for the establishment of trees in carbon sink forests |
$ |
|
Deductible balancing adjustment amounts on depreciating assets (see Appendix 4) |
$ |
|
Balancing adjustments – catch-up deduction (R&D) |
$ |
|
Deduction for certain capital expenditure incurred to terminate a lease or licence (see Note 6) |
$ |
|
Forex taxable losses (see Foreign exchange gains and losses) |
$ |
|
Interest charge |
$ |
|
Hire-purchase agreements: interest component (see GST – Hire purchase and leasing) |
$ |
|
Luxury car leases: accrual amount (see Luxury car leases) |
$ |
|
Mains electricity connection to land used in carrying on a business (see Electricity and phone connections) |
$ |
|
Net adjustment to expenses claimed: increase in consumable stores (see Note 2) |
$ |
|
Net decrease in provisions |
$ |
|
Net decrease in trading stock valuation for tax purposes |
$ |
|
Part of prepaid expenses deductible this year, but not included at any other label (see Note 1(b)) |
$ |
|
Tax deductible borrowing costs |
$ |
|
Telephone line connection to land used for primary production (see Electricity and phone connections) |
$ |
|
Other deductible items |
$ |
|
Total |
$ |
Worksheet 2 notes
Use the notes below to help you to complete worksheet 2.
Note 1(a)
Insert the difference between the total amount of prepaid expenses incurred in 2023–24 and the amount the company is entitled to claim as a deduction in this year.
See Deductions for prepaid expenses 2024 for a detailed explanation of how to calculate the company’s deduction for 2022–23.
Note 1(b)
Insert the amount of prepaid expenditure that the company was not entitled to deduct in previous years, and which it is now entitled to deduct in 2023–24.
See Deductions for prepaid expenses 2024 for a detailed explanation of how the deduction for later years is calculated.
Note 2
Insert the difference between the value of consumable stores on hand at the end of the previous income year and the value of consumable stores on hand at the end of the current income year. The balance of these items determines whether they are add-backs or subtractions.
Note 3
Don't include any amounts for R&D assets subject to the R&D tax incentive. At label W in worksheet 2.
Generally, labels at item 7 require a split between amounts subject to the R&D tax incentive and other amounts. For example, book depreciation shown at item 6 – label X Depreciation expenses includes amounts for assets used in R&D activities.
However, amounts subject to the R&D tax incentive are added back at item 6 – labels D Accounting expenditure subject to item 7 – label R&D tax incentive item 7 and not at item 7 – label W Non-deductible expenses.
Disposal losses included at item 6 – label S All other expenses includes losses for assets used in R&D activities, however these amounts are not subject to the R&D tax incentive so are added back at item 7 – label W Non-deductible expenses and not at item 6 – label D Accounting expenditure subject to item 7 R&D tax incentive.
For more information, see Research and development tax incentive schedule and instructions 2024.
Note 4
If the company receives an individual’s Personal Services Income (PSI) other than in the course of conducting a personal services business (PSB), and does not promptly pay it to the individual as salary or wages:
- the net amount of PSI is attributed to the individual and is not assessable to the company
- certain related expenses are not deductible.
Expenses specifically denied include rent, mortgage interest, rates and land tax for the residence of individuals (or their associates – for example, spouse) whose efforts or skills mainly generate the PSI for the company, the costs of a second private use car and payments of salary or wages and superannuation for associates to the extent such payments relate to non-principal work.
The company is not entitled to a deduction for any net PSI loss that is transferred to the individual.
Note 5
Only include depreciation expenses at item 7 – label W Non-deductible expenses item 7 if the company is not using the small business entity depreciation rules or the company using the small business entity depreciation rules has assets excluded from the application of these rules. Don't include any pool deductions shown at item 6 Expenses – label X Depreciation expenses.
Note 6
Section 25-110 of the ITAA 1997 provides a 5 year straight-line deduction for certain capital expenditure incurred in terminating an operating lease or licence if the expenditure is incurred in the course of carrying on a business, or in connection with ceasing to carry on a business; see Tax deductions for depreciating assets and capital expenses.
If you have included an amount of capital expenditure incurred to terminate a lease or licence at any expense label in item 6, include the amount at item 7 – label W Non-deductible expenses.
Continue to: Appendixes for the company tax return