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  • 4 Transferred tax losses utilised

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

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    Note:

    • Do not include transferred tax losses utilised in accordance with the concessional method which allows the head company to utilise tax losses over three years where certain conditions are met.
    • Do not include group tax losses-losses generated by a consolidated group-utilised at item 4.
    • Do not include transferred net capital losses, foreign source losses or film losses utilised at item 4.
    • Transferred net capital losses utilised are shown at item 9, and foreign source losses at Part E-Foreign source losses.
    • For the definition of a tax loss refer to section 995-1 of ITAA 1997.

    This item requires information on the amount of transferred tax losses, excluding net capital losses, foreign source losses and film losses, utilised. A head company utilises a transferred tax loss to the extent it is deducted from an amount of the head company's assessable income or exempt income.

    Show at labels A, D, G, J, M and P, as required, the TFNs of those joining entities that had tax losses from their loss bundles utilised applying the available fraction method. A bundle of losses consists of all the losses of a joining entity that are transferred to the head company at the same time.

    If tax losses have been utilised in respect of six or fewer than six loss bundles, complete the number of labels required. If tax losses have been utilised in respect of more than six loss bundles, show the joining entity TFNs for those loss bundles that had the six largest amounts of tax losses utilised.

    Show at labels B, E, H, K, N and Q, as required, the corresponding available fractions calculated for the loss bundles for joining entities whose TFNs are recorded at labels A, D, G, J, M and P, respectively. Each available fraction is to be completed to three decimal places (for example, 0.475, 0.520, 0.700).

    Where losses are transferred for the first time, the available fraction is calculated like this

    modified market value of the joining loss entity at the initial transfer time
    adjusted market value of the head company at the initial transfer time

    For details of how the modified market value of the joining loss entity and adjusted market value of the head company are determined see the information on Part A-Tax losses and net capital losses consolidated, item 3.

    Available fractions are calculated and then adjusted to three decimal places. The third decimal place is rounded up if the fourth decimal place is 5 or more. Where an available fraction has been adjusted as a result of certain events-for example, a new member joined the group and transferred a loss bundle-show the adjusted available fraction applicable at the end of the year of income.

    An available fraction cannot be a negative amount or greater than one. If the sum of the group's available fractions would total more than one, each available fraction is proportionally reduced. Refer to subsection 707-320(2) of ITAA 1997.

    For more information regarding the calculation of the available fraction, see the information on Part A-Tax losses and net capital losses consolidated, item 3.

    Where the available fraction of a loss bundle has been increased as a result of one company-the value donor-donating value to a loss company, show the increased available fraction.

    For more information on the value donor concession, see the information on Part A-Tax losses and net capital losses consolidated, item 3.

    Show at labels C, F, I, L, O and R, as required, the corresponding amount of transferred tax losses utilised from loss bundles of joining entities whose TFNs are recorded at labels A, D, G, J, M and P, respectively. If tax losses have been utilised from more than six loss bundles, show the six largest amounts utilised.

    Note:

    • If one company-the value/loss donor-has donated some of its tax losses to another loss company-the real loss-maker-so that they can be used by the group in accordance with the real loss-maker's available fraction, do not include the amount of donated tax losses in the amounts shown for real loss-makers at labels C, F, I, L, O and R, as required.
    • Show donated tax losses utilised with the TFN of the value/loss donor company, not the real loss-maker. The available fraction recorded for the value/ loss donor in respect of tax losses donated is the available fraction of the real loss-maker company, not the value/loss donor's available fraction.
    • If a value/loss donor company has both donated tax losses utilised and non-transferable tax losses utilised, multiple entries are required for the value/ loss donor company. Show the donated tax losses utilised with the available fraction of the real loss-maker. Show the non-transferable tax losses utilised with the available fraction of the value/loss donor.

    Example 4

    A wholly owned group consists of a head company, H Co and two subsidiary companies-A Co, and B Co. The group consolidates on 1 July 2002. At that time, the adjusted market value of the group is $10,000. On 1 July 2002 tax losses are transferred to the head company from joining entities which satisfy the continuity of ownership and control transfer tests.

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

    Co

    Transferor TFN

    Modified market value ($)

    Tax loss
    $

    Transferable to

    H Co

    A Co

    B Co

    H

    111 111 111

    5,000

           

    A

    222 222 222

    3,000

    1,000

    Y

     

    Y

    B

    333 333 333

    2,000

    300
    250

    Y
    N

    Y
    N

     

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

    A

    B

    0.300

    0.200

    A Co and B Co satisfy the conditions for the value donor concession in respect of the transferable tax losses. Assume the recalculated available fractions, applying the value donor concession, are:

    A

    B

    0.900

    0.100

    B Co also satisfies the loss donor conditions and donates its transferable tax loss of $300 to A Co to be used in accordance with A Co's increased available fraction.

    For the 2002-03 income year, the consolidated group has assessable income of $2,200 and deductions of $200. There are no capital gains or assessable foreign or film income. The available fraction amount for each bundle is as follows:

    Loss bundle

    Income amount
    $

    Multiplied by available fraction

    Available fraction amount for bundle ($)

    A Co

    2,000

    0.900

    1,800

    B Co

    2,000

    0.100

    200

    The consolidated group can therefore utilise all of the tax losses in A Co's bundle ($1,000) and can also utilise all of B Co's transferable tax loss ($300) because it is used in accordance with A Co's increased available fraction. B Co's non-transferable tax loss ($250) can only be utilised to the extent of $200.

    The head company completes part A, item 4 on the schedule as follows:

     

    Transferor TFN

     

    Available fraction

       

    A

    222 222 222

    B

    0.900

    C

    1000

    D

    333 333 333

    E

    0.900

    F

    300

    G

    333 333 333

    H

    0.100

    I

    200

    J

     

    K

     

    L

     

    M

     

    N

     

    O

     

    P

     

    Q

     

    R

     

    Example 5

    A consolidated group determines the following amounts of tax losses utilised from eight loss bundles for the 2002-03 income year:

    Co

    Transferor TFN

    Available fraction

    Tax losses utilised
    $

    A

    111 111 111

    0.105

    5,250

    B

    222 222 222

    0.311

    4,100

    C

    333 333 333

    0.132

    2,350

    D

    444 444 444

    0.183

    4,730

    E

    555 555 555

    0.095

    1,300

    F

    666 666 666

    0.009

    25

    G

    777 777 777

    0.154

    3,405

    H

    888 888 888

    0.000

    2,100

    H Co and B Co have satisfied the value donor and loss donor conditions. H Co has donated its entire modified market value to B Co and also donated transferable losses to B Co, the real loss-maker. B Co's increased available fraction is 0.311 and H Co's reduced available fraction is 0.000.

    The head company completes part A, item 4 on the schedule as follows:

     

    Transferor TFN

     

    Available fraction

       

    A

    111 111 111

    B

    0.105

    C

    5,250

    D

    222 222 222

    E

    0.311

    F

    4,100

    G

    333 333 333

    H

    0.132

    I

    2,350

    J

    444 444 444

    K

    0.183

    L

    4,730

    M

    555 555 555

    N

    0.154

    O

    3,405

    P

    666 666 666

    Q

    0.311

    R

    2,100

    • Information has been recorded for the loss bundles that had the six largest amounts of tax losses utilised.
    • H Co's donated tax losses are shown against its TFN, not the TFN of the real loss-maker, B Co. The available fraction recorded for the value/ loss donor, H Co, in respect of tax losses donated, is the increased available fraction of the real loss-maker company, B Co, not H Co's reduced available fraction of nil.
     
    Last modified: 30 Jul 2003QC 27493