Financial Information
With the return open, click the financial tab to open this section of the company return items.These labels are for advisory purposes and include assets and liabilities and attributed foreign income.
Complete label N Functional currency translation rate item 8 if the company keeps its accounts solely or predominantly in a foreign currency (its applicable functional currency) and has elected to use that functional currency for its tax accounts which it then translates to Australian dollars (A$) to complete its tax return. If the company is using a functional currency, see the Guide to functional currency rules on the ATO website.
Show at label N Functional currency translation rate the exchange rate employed to translate the taxable income figure from the applicable functional currency into A$. The translation rate is the amount by which the functional currency amount must be divided in order to reflect an equivalent amount of Australian dollars (A$) i.e. the number of non-A$ currency units that equal one A$D, rounded to 4 significant figures.
Do not complete label N Functional currency translation rate if the company has elected to employ a non-A$ functional currency only to calculate net income attributable to the activities of an overseas Permanent Establishment, Controlled Foreign Company, Off-shore Banking Unit or Transferor Trust. See the Foreign income return form guide on the ATO website.
If label N Functional currency translation rate is completed, also complete label O Functional currency chosen.
CCH References
21-200 Attributable income of a CFC
23-070 General translation rules
Show at this label the net amount of commercial debts owed by the company that were forgiven during the income year-refer to Division 245 of the ITAA 1936.
Broadly, a debt is a commercial debt if any part of the interest payable on the debt is or would be an allowable deduction. A debt is forgiven if the company's obligation to pay the debt is released or waived or otherwise extinguished other than by payment in cash. Click the label to enter the various amounts in a Generic Schedule / Worksheet.
The net amount of commercial debts forgiven must be applied to reduce the company's deductible revenue losses, net capital losses, certain undeducted revenue or capital expenditure and the cost base of certain CGT assets, in that order.
See Appendix 1 of the Company tax return instructions.
CCH References
16-910 Commercial debt forgiveness
Franking Account Balance amounts integrate from the Franking Account worksheet<
Click the label to dissect amounts in Franking Account Worksheets.
Enter at this label the balance of the franking account at the end of the current income year, unless it is a deficit balance. If there is a deficit balance in the franking account at the end of the income year, you must lodge a Franking account tax return.
For how an R&D tax offset affects your franking account, see Franking account tax return and instructions on the AtO website for full instructions.
For information about the simplified imputation system, refer to the imputation products on the ATO website.
CCH References
4-700 Franking accounts
4-730 Franking surplus or deficit
Show at this label any excess franking tax offset calculated. There are three steps to the calculation.
Excess franking rebate calculation
Show at label H, any excess franking tax offset calculated as follows:
Calculate the amount of franking tax offsets that the company is entitled to. Franking tax offsets are available under Division 207 of the ITAA 1997 as a result of receiving a franked distribution and Subdivision 210-H of the ITAA 1997 as a result of receiving a franked distribution franked with a venture capital credit. The amount of franking tax offset that a company is entitled to, is equal to the share of franking credits included in distributions received from partnerships and trusts, and the amount of franking credits included at item 7, label J-Franking credits.
Do not include any franking tax offsets that are subject to the refundable tax offset rules under Division 67 of the ITAA 1997. For example, franking tax offsets of a life insurance company are generally subject to the refundable tax offset rules to the extent they relate to distributions paid on shares and other membership interests held on behalf of policy-holders. These amounts should not be included. Generally, however, the franking tax offsets of other companies are not subject to the refundable tax offsets rules.Calculate the amount of income tax that would be payable, taking into account all tax offsets (including its foreign income tax offsets), with the exception of the following tax offsets:
Any franking deficit tax offsets, and
Any tax offsets subject to the tax offset carry forward rules or the refundable tax offset rules, and
Any tax offset arising from a franking deficit tax (FDT) liability.
Calculate the amount of 'excess franking offset'. If the amount of franking tax offsets from step one exceeds the amount of hypothetical tax calculated at step 2 the excess is the amount of 'excess franking offset' which should be recorded at label H-Excess franking offset.
If the company has excess franking offsets, it may convert the excess franking offsets into an amount of tax loss to carry forward to later income years.
Sample calculation - excess franking rebate
For the current income year ABC Company Ltd has the following:
Item 6 label H Total dividends 280 Franked distribution.
Item 7 label J Franking credits 120.
Item 7 label X Other deductible expenses 100.
The $120 franking tax offset is not subject to the refundable tax offset rules in Division 67 of the ITAA 1997. ABC Company Ltd has no net exempt income for the year and it does not have a tax loss for the year.
ABC Company Ltd would work out its 'excess franking rebate' as follows:
Calculate the amount of franking tax offsets that it is entitled to. In this instance, ABC Company Ltd is not entitled to a refund of excess franking tax offsets; therefore it is entitled to franking tax offsets of $120. However, for the purposes of calculating the 'excess franking rebate', these offsets are ignored; see step two below.
Calculate the amount of income tax payable ignoring franking tax offsets:
Taxable income $300 = ($280 + $120 - $100)
Gross tax $90
The excess franking rebate is $30.
ABC Company Ltd would record $30 at label H Excess franking rebate item 8.
ABC Company Ltd would now convert this amount of 'excess franking rebate' into a tax loss by dividing the 'excess franking rebate' amount ($30) by the corporate tax rate (30%) which results in a tax loss amount of $100. ABC Company Ltd would record the amount of this tax loss at label U Tax losses carried forward to later income years, item 13.
Deducting Prior or Current year losses
Legislation to ensure companies will not waste prior year or current year losses against franked dividend income has been enacted. The rule about choosing to deduct a prior year loss applies to deductions of tax losses in the year in which 1 July 2002 falls and later years. The rule ensuring current year losses are not wasted applies to the income year in which 1 July 2002 falls and later years. These new rules may be found in Schedule 8 to Taxation Laws Amendment Act (No.5) 2003.
Under these rules a current year loss (that is, the excess of allowable deductions over assessable income and exempt income) that would otherwise be incurred but for deriving franked dividend income may be carried forward as a tax loss for consideration as a deduction in later income years. Broadly, the amount of current year loss that may be carried forward under these rules is determined by reference to the amount of any unused franking tax offset (excess franking rebate).
If the company is in receipt of franked distributions from a New Zealand franking company, refer to the instructions found on Trans-Tasman Imputation: How to claim Australian franking credits attached to New Zealand dividends, available on the ATO website.
CCH References
3-075 Converting excess franking offsets to tax loss
4-825 Franked dividends received by loss companies
Show at label R assessable income derived by the company from foreign sources, grossed up by the amount of foreign tax paid, but net of expenses.
If the amount at R is a loss, precede the amount with a negative.
Net foreign income amounts will integrate to both labels R and C from the Foreign income worksheet (for).
See Foreign income return form guide (NAT 1840) on the ATO website for further information.
If a subsidiary member of a Consolidated or MEC group needs to lodge a company tax return for any non-membership periods during the year of income, that company may also need to lodge a Losses schedule for the non-membership periods.
See Consolidated groups losses schedule instructions (NAT 7891). The ATO provides information on its Consolidation home page.
If a head company needs to complete a Consolidated groups losses schedule, it might also need to complete the Capital gains schedule (BW).
See Capital gains tax on the ATO website.
See Losses schedule instructions for the current income year.
CCH References
21-680 Entitlement to foreign income tax offset
21-700 What is foreign income tax?