36‑17 How to deduct tax losses of corpor36‑17 How to deduct tax losses of corporate tax entities

36‑17 How to deduct tax losses of corporate tax entities

(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 (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 (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.

(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.

(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 (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.