Income Tax loss - carried forward like CGT losses?

Discussion in 'Accounting & Tax' started by coins, 3rd Mar, 2020.

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  1. coins

    coins Well-Known Member

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    I'm curious to know, if a person has a negative taxable income, does this carry forward to the next year just like CGT losses?
     
  2. Mike A

    Mike A Accountant Business Member

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    It does but make sure it is negative.

    Some people think that because they are below the tax free threshold that this can also be carried forward. If it's between the tax-free threshold and zero then this is effectively lost
     
  3. coins

    coins Well-Known Member

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    Cool, thanks Mike!
     
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Some deductions are also impacted if there are losses. Deductible super contributions and gifts for example cannot create a tax loss and if these are claimed the ATO will cancel the excess amount. There is a strategy available to defer gift deductions for up to 5 years.

    Tax losses also are reduced by low income. Fred may have a c/fwd tax loss of $11,000 in the 2019 tax year. He then works and earns $11,000 in the 2020 year and thinks he doesnt need to lodge. However he must reduce the tax loss by ALL income even if its not assessable. So his tax loss would reduce to $0

    Tax losses must also be reduced by EXEMPT income which includes child care payments from the Govt and even the recent bushfire assistance payments. Amounts not included as income

    Many people who own property who have been non-resident accumulate income tax losses and must consider this on their return. Another benefit is that they can use a income tax loss to offset the taxable value of a CGT event. People often incorrectly think that they can only use CGT losses to reduce CGT income. (A CGT loss however may only offset a CGT gain and not ordinary income.)
    eg Fred returns to Australia with a tax loss of $110,000. He works and earns $20K but sells units in a property trust after returning and $90,000 profit occurs. Fred would lodge and declare the CGT income of $45k and the employment income of $20K and reduce his tax loss by $65k.