Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-5 - RULES ABOUT DEDUCTIBILITY OF PARTICULAR KINDS OF AMOUNTS  

Division 36 - Tax losses of earlier income years  

Subdivision 36-A - Deductions for tax losses of earlier income years  

SECTION 36-17   How to deduct tax losses of corporate tax entities  

36-17(1)    
A *tax loss of an entity for a *loss year is deducted in a later income year as follows if the entity is a *corporate tax entity at any time during the later income year.

Note 1:

A tax loss can be deducted under this section only to the extent that it has not already been utilised: see subsection 960-20(1) .

Note 2:

A corporate tax entity may also, in the 2020-21, 2021-22 or 2022-23 income year, be able to carry a loss back to the 2018-19, 2019-20, 2020-21 or 2021-2022 income year: see Division 160 .

If the entity has no net exempt income

36-17(2)    
If the entity ' s total assessable income for the later income year exceeds the entity ' s total deductions (except *tax losses), the entity is to deduct from that excess so much of the tax loss as the entity chooses. The entity may choose a nil amount.

If the entity has net exempt income

36-17(3)    
If the entity has ^* net exempt income for the later income year and the entity ' s total assessable income (if any) for that year exceeds the entity ' s total deductions (except ^* tax losses), the entity is to:

(a)    first, deduct the tax loss from the net exempt income; and

(b)    secondly, deduct from the part of the total assessable income that exceeds those deductions so much of the undeducted amount of the tax loss (if any) as the entity chooses.

The entity may choose a nil amount under paragraph (b) .

Note:

To work out the corporate tax entity ' s net exempt income: see section 36-20 .

36-17(4)    
However, if the entity has *net exempt income for the later income year and those deductions exceed the entity ' s total assessable income, the entity is to:

(a)    subtract that excess from the net exempt income; and

(b)    deduct the *tax loss from any net exempt income that remains.

Note:

This means there is no choice available under this subsection.

36-17(4A)    

For subsection (3) or (4) , if the entity has *exempt income under section 51-100 (about shipping) for the later income year, disregard 90% of so much of the entity ' s *net exempt income for the later income year as directly relates to that exempt income.

Limit to how much the entity can choose

36-17(5)    

The choice that the entity has under subsection (2) or (3) for the later income year is subject to both of the following:

(a)    the entity must choose a nil amount if, disregarding the ^* tax loss and other tax losses of the entity, the entity would have an amount of ^* excess franking offsets for that year;

(b)    if, disregarding the tax loss and other tax losses of the entity, the entity would not have an amount of excess franking offsets for that year - the entity must not choose an amount that would result in the entity having an amount of excess franking offsets for that year.

Example:

For the 2017-18 income year, Company A (which is not a base rate entity) has:

• a tax loss of $150 from a previous income year; and

• assessable income of $200 (franked distribution of $70, franking credit of $30 and $100 of income from other sources); and

• no deductions; and

• no net exempt income.

The tax offset of $30 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

Company A would not have an amount of excess franking offsets for that year if the tax loss were disregarded (see section 36-55 ). This is because the tax offset of $30 is less than $60, the amount of income tax that Company A would have to pay if it did not have the tax offset and the tax loss. Paragraph (a) therefore does not apply.

If Company A chooses to deduct the full amount of the tax loss, it would have an amount of excess franking offsets of $15:

Company A therefore cannot make this choice because of paragraph (b) .

However, if Company A chooses to deduct $100 of the tax loss, it would not have an amount of excess franking offsets:

Company A therefore can choose to deduct $100 of the tax loss.

36-17(6)    
The entity must state its choice under subsection (2) or (3) in its *income tax return for the later income year.

General

36-17(7)    
If the entity has 2 or more *tax losses, the entity is to deduct them in the order in which the entity incurred them.

36-17(8)    
(Repealed by No 88 of 2013)

36-17(9)    
(Repealed by No 88 of 2013)

Recalculation of amounts resulting in a choice or a change of a choice

36-17(10)    
Subsection (11) or (12) applies if at least one of the following amounts is recalculated after an entity has lodged its *income tax return for an income year:

(a)    

the amount of a *tax loss that the entity can * utilise in that year;

(b)    the amount of the difference between the entity ' s total assessable income for that year and the entity ' s total deductions (other than *tax losses) for that year;

(c)    the amount of the entity ' s *net exempt income for that year;

whether or not the amount is recalculated in an amendment of the entity ' s assessment for that year, and whether or not the amount was a nil amount before the recalculation (or has become a nil amount after the recalculation).

36-17(11)    
If:

(a)    before the recalculation, a choice under subsection (2) or (3) for the income year was not available to the entity; but

(b)    as a result of the recalculation, the choice has (apart from subsection (6) ) become available to the entity;

the entity can make that choice by written notice given to the Commissioner.

36-17(12)    
If:

(a)    the entity made a choice under subsection (2) or (3) for the income year; but

(b)    as a result of the recalculation, the entity wishes to change that choice;

the entity can do so by written notice given to the Commissioner.

36-17(13)    
Subsections (10) to (12) have effect subject to section 170 of the Income Tax Assessment Act 1936 (about amendment of assessments).