Show download pdf controls
  • 11 If you completed item 4 or item 9 in Part A, were the apportionment rules applied?

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    If transferred tax losses or transferred net capital losses have been utilised from any loss bundle applying the available fraction method, you must complete this item.

    The use of transferred losses is apportioned if their available fraction applied for only part of the income year or when the available fraction changes during the income year. Apportionment applies if:

    • losses in a bundle are transferred to the head company by a subsidiary member that is joining part way through the head company's income year, or
    • available fractions are adjusted during the income year. Adjustments to available fractions are required if additional loss bundles are transferred to the head company at a later time or because there has been a capital injection or a non-arm's length transaction. Refer to subsection 707-320(2) of ITAA 1997. In these cases, available fractions will have different numerical values for different periods of the income year.

    Apportionment in the first case ensures that a subsidiary's losses are only offset against income generated by the group after the subsidiary becomes a member.

    Apportionment in the second case ensures that an adjusted available fraction that is less than the previous fraction only applies from the date of the event that triggered the adjustment.

    Note that if a consolidated group is formed part way through the head company's income year, the head company's use of its own prior year losses (transferred to itself under Subdivision 707-A on consolidation) will be unrestricted in respect of income broadly attributable to the pre-consolidation period. This is achieved by treating the losses actually incurred by the head company, which are subsequently transferred to itself at consolidation, as being in a bundle with an available fraction of one for the part of the head company's income year which is prior to the formation of the consolidated group.

    Refer to section 707-335 of ITAA 1997.

    If the answer is yes, print Y at label W.

    If the answer is no, print N at label W.

    Example 13
    Applying the available fraction using the three-step process

    XYZ consolidated group is working out the group's taxable income for the 2003-04 income year.

    For the income year, the group has capital gains of $900 and capital losses of $200.

    The group's only other assessable income is $9,000. Deductions relating to that income are $990. The group has a tax loss carried forward from the previous income year of $60.

    The group's remaining transferred losses at that time, and their available fractions, are set out in the table. The continuity of ownership and control tests or same business tests are passed in respect of the recoupment of all these losses.

    Loss bundle

    Available fraction

    Unused transferred losses

    Bundle 1

    0.146

    $50 net capital losses

    $3,000 tax losses (not film)

    Bundle 2

    0.214

    $100 net capital losses

    $5,000 tax losses (not film)

    Step 1: Work out the categories of group income or gains.

    Income or gains

    Amount excluding group losses

    Less: Other allowable deductions/ reductions

    Less: Group/ concessional losses of that sort

    Column 5 Income/ gains available for the bundle $

    Capital gains

    900

    200

    0

    700

    Other assessable income

    9,000

    990

    60

    7,950

    Step 2: Calculate the fraction of the income/ gain that is attributable to each bundle.

    Column 1 Income or gains

    Loss bundle

    Column 5 amount
    $

    Multiplied by available fraction

    Available fraction amount for bundle ($)

    Capital gains

    Bundle 1

    Bundle 2

    700

    700

    0.146

    0.214

    102

    150

    Other assessable income

    Bundle 1

    Bundle 2

    7,950

    7,950

    0.146

    0.214

    1,161

    1,701

    Step 3(a): Work out a notional taxable income for bundle 1.

    As a result of step 2, it is assumed that XYZ group's only capital gain is $102. On the basis of that assumption, the whole of the $50 net capital loss from bundle 1 can be used. This results in a (notional) net capital gain for bundle 1 of $52 ($102 -$50).

    Notional taxable income for bundle 1:

    Assessable income

    $

    Deductions

    $

    Net capital gain

    Other assessable income

    52

    1,161

    Tax losses (bundle 1)

    1,213

    Total

    1,213

    Total

    1,213

    Therefore, XYZ group is able to use $1,213 of its tax losses from bundle 1.

    Step 3(b): Work out a notional taxable income for bundle 2.

    As a result of step 2, it is assumed that XYZ group's only capital gain is $150. On the basis of that assumption, the whole of the $100 net capital loss from bundle 2 can be used. This results in a (notional) net capital gain for bundle 2 of $50 ($150 -$100).

    Notional taxable income for bundle 2:

    Assessable income

    $

    Deductions

    $

    Net capital gain

    Other assessable income

    50

    1,701

    Tax losses (bundle 1)

    1,751

    Total

    1,751

    Total

    1,751

    Therefore, XYZ group is able to use $1,751 of its tax losses from bundle 2.

    Determine XYZ group's actual taxable income or gain

    First work out XYZ group's net capital gain

    Capital gains

    $

    Capital losses

    $

    Capital gain

    900

    Group capital losses

    Net capital losses:
    (bundle 1)
    (bundle 2)

    200

     
    50
    100

    Total

    900

    Total

    350

    XYZ group's net capital gain is $550 ($900 -$350).

    Assessable income

    $

    Deductions

    $

    Net capital gain

    Other assessable income

    550

    9,000

    Deductions

    Group loss

    Tax losses:
    (bundle 1)
    (bundle 2)

    990

    60

     
    1,213
    1,751

    Total

    9,550

    Total

    4,014

    XYZ group's taxable income is $5,536 ($9,550 -$4,014).

    Example 14
    Value donor and loss donor rules

    A wholly owned group consists of a head company, H Co and three subsidiary companies-A Co, B Co and C Co. B Co is a subsidiary of A Co but is not a subsidiary of C Co. The group consolidates on 1 July 2002. On that date, the adjusted market value of the group is $10,000.

    Details of modified market value and subsidiary losses are as follows:

    Co

    Modified market value
    $

    Tax loss

    Net capital loss

    Transferrable to

    Year

    $

    Year

    $

    H Co

    A Co

    B Co

    C Co

    H

    4,000

                   

    A

    3,000

    2001

    400

       

    Y

     

    Y

    Y

    B

    500

       

    1999

    200

    N

    Y

     

    N

    C

    2,500

    2000

    2001

    80

    100

       

    N

    Y

    N

    Y

    N

    Y

     

    In the absence of the value donor concession, the group's available fractions are:

    A

    B

    C

    Total

    0.300

    0.050

    0.250

    0.600

    A Co and C Co each have a loss that is transferable to all other group members. B Co has a loss that is only transferable to A Co.

    While there are various options for donating modified market value and losses, it is assumed, in this example, that modified market value and losses are to be donated to A Co.

    Donating modified market value and losses to A Co

    • H Co: modified market value can be added to A Co's modified market value.
    • C Co: modified market value can also be added to A Co's modified market value. Assume only 60% of C Co's value is added. Note that some value is to remain with C Co which has a non-transferable loss. C Co's 2001 loss is moved to A Co's bundle.
    • B Co: could move modified market value to A Co, but cannot donate its loss to A Co because B Co's loss is not transferable to C Co-one of A Co's other value donors. Therefore, it is determined that B Co will retain its modified market value and loss.
     

    A Co receives 100% of H Co's modified market value and 60% of C Co's modified market value. A Co's available fraction is recalculated as:

    [$3,000 + $4,000 + (60% x $2,500)] $10,000 = 0.85

    C Co's available fraction is recalculated as:

    (40% x $2,500) $10,000 = 0.1

    B Co's available fraction remains at 0.05.

    Therefore, the group's available fractions and the losses to which they apply are:

    Co

    Available fraction

    Tax loss

    Net capital loss

    Comments

    Year

    $

    Year

    $

    A

    0.850

    2001

    2001

    400

    100

       

    From C Co's bundle

    B

    0.050

       

    1999

    200

     

    C

    0.100

    2000

    800

         
    Last modified: 30 Jul 2003QC 27493