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BC 3: Annual total deduction
or “The total amount you can deduct from your income for the tax year”
You could also call this:

“Calculating your income after expenses”

When you have income and expenses in a tax year, you need to work out if you have net income or a net loss. Here’s how you do it:

If your annual gross income (all the money you earn) is more than your annual total deduction (all the expenses you can claim), the difference is your net income. This is the amount you made after expenses.

If your annual gross income is the same as your annual total deduction, your net income is zero. This means you didn’t make or lose any money after expenses.

If your annual total deduction is more than your annual gross income, the difference is your net loss. In this case, your net income is zero because you didn’t make any money after expenses.

If you have a net loss, it becomes part of your tax loss for the year. This tax loss can be used in different ways according to Part I of the tax rules. You might be able to:

  1. Use it to reduce your net income in a future tax year.
  2. Let another person use it to reduce their net income in this or a future tax year.
  3. Use it in other ways that the tax rules allow.

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Next up: BC 5: Taxable income

or “How to calculate your taxable income by subtracting tax losses from your net income”
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Part B Core provisions
Calculating and satisfying income tax liabilities

BC 4Net income and net loss

  1. If, for a tax year, a person's annual gross income is more than their annual total deduction, the difference is their net income for the year.

  2. If, for a tax year, a person's annual gross income equals their annual total deduction, their net income for the year is zero.

  3. If, for a tax year, a person's annual total deduction is more than their annual gross income, the difference is their net loss for the year, and their net income for the year is zero.

  4. A person's net loss for a tax year is included under Part I (Treatment of tax losses) in their tax loss for the tax year that may, under Part I, be—

  5. subtracted from their net income for a future tax year:
    1. made available to another person to subtract from that other person's net income for that or a future tax year:
      1. used in certain other ways.

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