ACX2100 Chap.6 Current Tax: Taxable Profit, the Worksheet and Tax Losses
Current Tax: Taxable Profit, the Worksheet and Tax Losses
Current tax begins with accounting profit or loss and remeasures the period under tax law. Permanent differences never reverse; temporary differences reflect different timing and reverse later. The four worksheet directions are derived from arithmetic. Add back an accounting expense that tax does not deduct now. Deduct a tax deduction that accounting has not expensed now. Deduct accounting income not taxable now.
Add taxable income not recorded in accounting income now. Classify every line as permanent or temporary even when two lines share the same current sign, because only temporary differences feed deferred tax. Re-add additions and deductions independently, prove taxable profit and apply the rate last.
Tax losses require their own roll-forward: an accounting loss is not automatically a tax loss, exempt income must be treated consistently, and any potential deferred tax asset is recognised only under AASB 112 criteria. The Alpha and Delta taught sequences are retained as verified numeric spines. The damaged Week 5 direction table is not used; directions come from clean Week 6 explanations and independently checked examples.
What this chapter covers
- 01
Accounting profit versus taxable profit
- 02
Permanent differences
- 03
Temporary differences
- 04
Four add-back and deduction directions
- 05
Current-tax worksheet columns
- 06
Accounting and tax depreciation
- 07
Non-deductible expenses and exempt income
- 08
Alpha Ltd verified totals
- 09
Tax-loss creation and carry-forward
- 10
Delta Designs loss recoupment
- 11
Current tax payable versus total tax expense
AskSia-authored practice — build a current-tax worksheet from six differences
- AddsAdd back fine $5,000, unpaid annual leave $22,000 and accounting depreciation $48,000. Additions total $75,000.
- DeductionsDeduct tax depreciation $61,000, exempt income $7,000 and current tax deduction for the prior provision $3,000. Deductions total $71,000.
- TaxableTaxable profit is $284,000 + $75,000 − $71,000 = $288,000.
- TaxCurrent tax payable is $288,000 × 30% = $86,400.
- ClassifyFine and exempt income are permanent on the stated facts; leave, depreciation and the debt deduction are temporary timing items.
Key terms
- Accounting profit
- Profit measured under accounting standards before income tax.
- Taxable profit
- Profit for the period determined under tax law on which current tax is payable.
- Permanent difference
- Difference between accounting and tax that never reverses and therefore creates no deferred-tax balance.
- Temporary difference
- Difference arising because accounting and tax recognise an item in different periods, reversing later.
- Tax loss
- Negative taxable amount available for carry-forward and future recoupment subject to tax rules.
Current Tax: Taxable Profit, the Worksheet and Tax Losses FAQ
Why add back accounting depreciation?
Accounting profit has already deducted it. Add it back, then deduct the separate tax depreciation allowance to reach the tax-law measurement.
Are all add-backs permanent?
No. A fine may be permanently non-deductible, while unpaid annual leave is added back only until paid. The sign does not determine whether a difference reverses.
What are the Alpha Ltd totals?
Accounting profit $250,450 plus additions $218,450 less deductions $331,333 gives taxable profit $137,567 and current tax about $41,270 at 30%.
Is an accounting loss automatically a tax loss?
No. Apply all tax adjustments, including exempt income and non-deductible items. Roll forward tax losses separately and assess any DTA recognition under AASB 112.
Exam move
Re-derive directions instead of memorising arrows. Ask whether accounting or tax recognised an expense, deduction or income first and whether taxable profit must rise or fall. Practise one worksheet with both accounting and tax depreciation shown gross, one with a provision deductible on payment, and one loss-year/recoupment pair. Re-add both columns and carry full precision to the final tax calculation.
Use Alpha as a totals benchmark and Delta as a current-versus-deferred bridge, not as tables to copy. Week 5 prescribed reading is Chapter 13. Give each adjustment a one-line reason beside the number: accounting expense not deductible now, tax deduction without current accounting expense, accounting income not assessable, or assessable income not in current accounting profit.
This forces the sign to follow timing rather than memory. Use one convention consistently for tax losses and label it at the top of the page. After calculating taxable profit, rebuild the total from the opposite direction to catch a reversed adjustment. For a loss recoupment, distinguish the current tax benefit from any deferred-tax recognition and apply only the facts provided.
Finish by explaining the Alpha and Delta totals in words; arithmetic that cannot be narrated is not yet secure.
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