Losses Incurred in Gaining Exempt Income
19.A96. Section 77 provides for the allowance from assessable income of a deduction for losses incurred in carrying on a business in Australia or Papua New Guinea, the proceeds of which are or would be exempt income. Where a deduction has been allowed for a loss and there are subsequent profits from the exempt business, those profits will be assessable to the extent of the deduction so allowed. Such profits are only assessable where the previous loss, for which a deduction had been allowed, was incurred within the three years of income immediately preceding the year of income in which the profit was derived.
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19.A97. A deduction under section 77 is set off against other income in the following order:
- (a) personal exertion income;
- (b) income from property other than dividends;
- (c) income from dividends.