Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p5
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 5/10)
Character Range: 787483–789994

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

General
 (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.

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