This one is different from Phase 1
Phase 1 of the bounty programme asked reviewers to check a calculator. You’d read a brief, run through a worked example, and tell us whether our engine agreed with what a competent practitioner would produce from the statute.
Here, you won’t be checking a calculator. You’ll be checking the law itself, written out as rules — and telling us whether we’ve stated it correctly.
The story behind it
A LodgeiT customer told us our software was carrying forward too much tax loss. Division 36, exempt income against prior-year losses. Over three days two support staff, our dev team and two AI systems failed to work out whether she was right.
She was.
Our calculation had been built from the ATO’s L1 label worksheet rather than from the statute — and in a loss year those two diverge, because s 36-15(4)(a) has a step the worksheet doesn’t. Nobody in that chain was careless. The form and the law disagree, quietly, in exactly one kind of year.
What we’ve done about it is write Division 36 out as rules a machine can execute and a practitioner can read. The language is Logical English — developed by Bob Kowalski at Imperial, and LodgeiT is a co-owner of the current version. It produces a proof tree in plain English for every answer, and it refuses to answer when it hasn’t been told enough.
But a rule is only trustworthy if someone with a practising certificate has read it and agreed it states the law correctly. That’s the job. It’s the first one of these we’ve done, and if it works it becomes how we build.
What’s involved
- One file, about 90 lines of rules, with a plain-English note above each one saying what we think it means.
- No software. It’s a text file. Open it in Notepad or your mail preview. You can’t break anything.
- Roughly two to three hours for a careful read.
- $750 ex GST, paid within five business days of your verdict.
A REJECT is worth the same as an ACCEPT
We want to be unambiguous about this because the incentive matters. Phase 1’s most valuable finding by information-per-dollar was a reviewer who rejected our brief outright — the question itself was defective. He was paid in full and it changed how we write briefs.
If this file is sound, say so and take the fee. If it’s rotten, say that and take the same fee. A polite approval of something wrong is the one outcome we can’t use.
The three attachments
- 01 — How to read a Logical English rule. Start here. What the language is, how to read a rule line by line, what every odd-looking symbol means, and what we’re asking you to look for. Written for someone with no technical background. If any line of the rules doesn’t read as clear English, that’s our defect, not your failing — and it’s a finding worth reporting.
- 02 — The rules themselves (also reproduced inline below so you can start reading immediately).
- 03 — The verdict form. Eight specific questions. Prose in an email is equally fine.
The rules, inline
The full 90-line rules file, reproduced below so you can start reading immediately. The download link (attachment 02) below sends you the same file for offline review or printing.
the target language is: prolog.
% Division 36 loss sequencing, written out as executable rules.
% Every rule below is a statement of law. Above each one, in plain words, is what
% we think it says. If any of those statements is wrong, our fix will be wrong.
%
% ITAA 1997 s 36-10 how a tax loss is calculated
% ITAA 1997 s 36-15 how earlier year tax losses are deducted (non-corporate)
% ITAA 1997 s 36-20 what net exempt income means
% ITAA 1997 s 6-20 exempt income
% ITAA 1997 s 6-23 non-assessable non-exempt income
the templates are:
*a taxpayer* has deductions of *an amount* in *a year*.
*a taxpayer* has assessable income of *an amount* in *a year*.
*a taxpayer* has a loss brought forward of *an amount* into *a year*.
*a taxpayer* receives *a receipt* of *an amount* in *a year*.
*a receipt* is exempt income under *a provision*.
*a receipt* is not assessable and not exempt under *a provision*.
*a taxpayer* incurs expenses of *an amount* in earning *a receipt*.
*a taxpayer* has expenses of *an amount* in earning *a receipt*.
*a taxpayer* has net exempt income of *an amount* in *a year*.
*a taxpayer* has an excess of deductions of *an amount* in *a year*.
*a taxpayer* has a tax loss of *an amount* for *a year*.
*a taxpayer* has net exempt income left of *an amount* in *a year*.
*a taxpayer* applies *an amount* against the loss brought forward in *a year*.
*a taxpayer* carries forward *an amount* after *a year*.
the knowledge base div36 includes:
% Expenses of earning a receipt are whatever was incurred.
a taxpayer has expenses of an amount in earning a receipt
if the taxpayer incurs expenses of the amount in earning the receipt.
% Where no expenses of earning the receipt have been identified, they are nil.
a taxpayer has expenses of 0 in earning a receipt
if the taxpayer receives the receipt of a gross amount in a year
and it is not the case that
the taxpayer incurs expenses of a cost in earning the receipt.
% s 36-20. Net exempt income is exempt income reduced by the expenses of
% earning it. It cannot be negative.
a taxpayer has net exempt income of an amount in a year
if the taxpayer receives a receipt of a gross amount in the year
and the receipt is exempt income under a provision
and the taxpayer has expenses of an expense amount in earning the receipt
and a surplus = gross amount - expense amount
and the maximum of the surplus and 0 is the amount.
% s 6-23. Non-assessable non-exempt income is not exempt income, so it produces
% no net exempt income and never enters any of the steps below.
a taxpayer has net exempt income of 0 in a year
if the taxpayer receives a receipt of a gross amount in the year
and the receipt is not assessable and not exempt under a provision.
% s 36-10, steps 1 and 2. The year's deductions, less the year's assessable
% income. Nil where assessable income is the greater.
a taxpayer has an excess of deductions of an amount in a year
if the taxpayer has deductions of a deduction amount in the year
and the taxpayer has assessable income of an assessable amount in the year
and a shortfall = deduction amount - assessable amount
and the maximum of the shortfall and 0 is the amount.
% s 36-10, steps 3 and 4. Net exempt income is subtracted INSIDE the tax loss
% calculation, not after it. There is a tax loss only to the extent an amount
% remains: where net exempt income covers the excess, the tax loss is nil.
a taxpayer has a tax loss of an amount for a year
if the taxpayer has an excess of deductions of an excess amount in the year
and the taxpayer has net exempt income of a net exempt amount in the year
and a residue = excess amount - net exempt amount
and the maximum of the residue and 0 is the amount.
% s 36-15(4)(a). The excess of deductions over assessable income is taken off
% net exempt income FIRST, before anything reaches the loss brought forward.
a taxpayer has net exempt income left of an amount in a year
if the taxpayer has net exempt income of a net exempt amount in the year
and the taxpayer has an excess of deductions of an excess amount in the year
and a remainder = net exempt amount - excess amount
and the maximum of the remainder and 0 is the amount.
% s 36-15(4)(b). The loss brought forward is then deducted from whatever net
% exempt income is left, and no more than that.
a taxpayer applies an amount against the loss brought forward in a year
if the taxpayer has a loss brought forward of a brought forward amount into the year
and the taxpayer has net exempt income left of a remaining amount in the year
and the minimum of the brought forward amount and the remaining amount is the amount.
% What goes into next year: this year's tax loss, plus so much of the loss
% brought forward as was not absorbed.
a taxpayer carries forward an amount after a year
if the taxpayer has a tax loss of a year loss amount for the year
and the taxpayer has a loss brought forward of a brought forward amount into the year
and the taxpayer applies an absorbed amount against the loss brought forward in the year
and the amount = year loss amount + brought forward amount - absorbed amount.
% ---------------------------------------------------------------------------
% Your figures. Wren Kavanagh is a stand-in for the client.
% ---------------------------------------------------------------------------
% 1. As reported: the 4,579 is exempt income, with no expenses of earning it.
scenario as reported is:
Wren Kavanagh has deductions of 2822 in FY2026.
Wren Kavanagh has assessable income of 0 in FY2026.
Wren Kavanagh has a loss brought forward of 3286 into FY2026.
Wren Kavanagh receives the pension of 4579 in FY2026.
the pension is exempt income under section 52-10.
net exempt income expects answers ["Wren Kavanagh has net exempt income of 4579 in FY2026"].
this year loss expects answers ["Wren Kavanagh has a tax loss of 0 for FY2026"].
applied expects answers ["Wren Kavanagh applies 1757 against the loss brought forward in FY2026"].
carried forward expects answers ["Wren Kavanagh carries forward 1529 after FY2026"].
% 2. If the 4,579 turns out to be non-assessable non-exempt income instead.
% Then no offset arises at all, at either step.
scenario if nane is:
Wren Kavanagh has deductions of 2822 in FY2026.
Wren Kavanagh has assessable income of 0 in FY2026.
Wren Kavanagh has a loss brought forward of 3286 into FY2026.
Wren Kavanagh receives the payment of 4579 in FY2026.
the payment is not assessable and not exempt under section 59-30.
net exempt income expects answers ["Wren Kavanagh has net exempt income of 0 in FY2026"].
this year loss expects answers ["Wren Kavanagh has a tax loss of 2822 for FY2026"].
applied expects answers ["Wren Kavanagh applies 0 against the loss brought forward in FY2026"].
carried forward expects answers ["Wren Kavanagh carries forward 6108 after FY2026"].
% 3. If the 4,579 is a gross figure and there were expenses of earning it.
% Illustrated with 500. Every dollar of expense adds a dollar to the
% carry-forward, so this one matters if any expenses were incurred.
scenario if expenses is:
Wren Kavanagh has deductions of 2822 in FY2026.
Wren Kavanagh has assessable income of 0 in FY2026.
Wren Kavanagh has a loss brought forward of 3286 into FY2026.
Wren Kavanagh receives the pension of 4579 in FY2026.
the pension is exempt income under section 52-10.
Wren Kavanagh incurs expenses of 500 in earning the pension.
net exempt income expects answers ["Wren Kavanagh has net exempt income of 4079 in FY2026"].
this year loss expects answers ["Wren Kavanagh has a tax loss of 0 for FY2026"].
applied expects answers ["Wren Kavanagh applies 1257 against the loss brought forward in FY2026"].
carried forward expects answers ["Wren Kavanagh carries forward 2029 after FY2026"].
query net exempt income is:
which taxpayer has net exempt income of which amount in which year.
query this year loss is:
which taxpayer has a tax loss of which amount for which year.
query applied is:
which taxpayer applies which amount against the loss brought forward in which year.
query carried forward is:
which taxpayer carries forward which amount after which year.
The question we value most is Q6
Can you construct a fact pattern where these rules produce a plausible figure that’s wrong?
That one is worth the fee on its own.
What we’re asking you to do
- Read How to read a Logical English rule (attachment 01) — ten minutes.
- Read the rules (attachment 02), one line at a time, cross-checking against your reading of s 36-10, 36-15 and 36-20.
- Fill out the verdict form (attachment 03), or write your verdict as free-form prose in an email. Both are equally acceptable.
- Email your verdict to support@lodgeit.net.au.
What is not in scope
You are not being asked to install anything, run anything, audit our software architecture, review our source code, or learn a programming language. You are being paid for your tax judgement. The file is text. The question is: does this text state the law correctly?
Ask questions
“I don’t understand what this line is doing” is not a sign you’re doing it wrong; it’s a sign we wrote it badly, and we’d rather hear it than not. Email support@lodgeit.net.au any time.
Timeline
We’d like verdicts by 16 September 2026 (approximately two weeks from your invitation). Happy to extend if you need it — just say.
Attribution — how your work gets credited
Your accepted verdict is minted into the public reviewer registry with:
- Your name and credential class
- The verdict hash (SHA-256 of your submitted document)
- The version of the rules file you ratified (SHA-256 of the
.lefile) - The publication date
Default is named credit. You may opt down to initialled or anonymous when you submit. Opt-down does not reduce the prize.