Guide to the loss recoupment rules

What are the modified COT tracing rules?

The modified COT includes various tracing rules that are designed to make it easier for a company to satisfy the COT. The key features of these rules are:

1. A direct stake of less than 10% in the company is attributed to a single notional entity.
2. An indirect stake of less than 10% in the company is attributed to a top interposed entity.
3. If a widely held company holds a direct or indirect stake of between 10% and 50% (inclusive) in the company, this stake is attributed to the widely held company.
4. Stakes held by certain entities in the company are generally attributed to those entities. Examples of these entities include a
• complying super fund
• sporting club not carried on for profit to its members
• managed investment scheme registered under the Corporations Act 2001.
5. An indirect stake held by way of bearer shares in a foreign listed company is attributed to a single notional entity in certain circumstances.
6. An indirect stake held by a depository entity in the company where there is an interposed foreign listed company is attributed to the depository entity in certain circumstances.

These tracing rules are subject to an ordering rule, a no detriment rule and various integrity rules as follows:

• A tracing rule does not apply to a stake in a company where an earlier listed rule applies. For example, where a direct stake of 9% in the company is held by a complying super fund, this stake is deemed to be held by a single notional entity applying tracing rule 1. Tracing rule 4 does not apply.
• All tracing rules are intended to be concessional and are therefore subject to a no detriment rule.
• Tracing rules 1 and 5 are subject to a minimum interests rule.
• Tracing rules 2, 3, 4 and 6 are subject to a same share same interest rule.
• All tracing rules are subject to a controlled company rule.

Sections within The modified continuity of ownership test and the same business test

• When does the modified COT apply from?
• What companies are eligible for the modified COT?
• What are the ownership testing requirements?
• What are the modified COT tracing rules?
• What is meant by a voting, dividend or capital stake in a company?
• Tracing rule 1: Direct stakes of less than 10% in the company - section 166-225
• Tracing rule 2: Indirect stakes of less than 10% in the company - section 166-230
• Tracing rule 3: Direct and/or indirect stakes of between 10% and 50% (inclusive) held by a widely held company in the company - section 166-240
• Tracing rule 4: Stakes held in the company by certain other entities- section 166-245
• Tracing rule 5: Stakes in the company held indirectly by way of bearer shares in an interposed foreign listed company - section 166-255
• Tracing rule 6: Stakes in the company held indirectly by a depository entity as a shareholder of an interposed foreign listed company - section 166-260
• The minimum interests rule - section 166-270
• The no detriment rule - section 166-275
• The same share same interest rule - section 166-272
• The controlled companies rule - section 166-280