• Page 2 of the schedule

    5 Tax losses carried forward to later income years

    • Do not include net capital losses or film losses carried forward to later income years at item 5.
    • Show net capital losses carried forward to later income years at item 10.
    • For the definition of a tax loss, see section 995-1 of the ITAA 1997.

    The head company must keep a record of its tax losses and account for any adjustments, including those made by the Australian Taxation Office (ATO). These records must be retained for five years after the end of the income year in which the loss was fully deducted.

    If required, the head company must be able to demonstrate not only the balance of any tax losses being deducted or carried forward, but also how those tax losses arose.

    Group

    Write at S the amount of group tax losses carried forward to later income years under section 36-17 of the ITAA 1997. Group tax losses are those tax losses that have been generated by the consolidated group.

    Transferred

    Write at V the amount of transferred tax losses carried forward to later income years under section 36-17 of the ITAA 1997. Transferred tax losses are tax losses that have been made outside the consolidated group and transferred into the group from an entity when it joined the group. Any concessional transferred tax losses carried forward are also included at V.

    Total

    Write at U the total of S and V.

    Transfer this amount to U item 13 Tax losses carried forward to later income years on your Company tax return 2016.

    The loss wastage rules apply in relation to amounts that are included in U item 13 on the company tax return. For more information on how this amount is calculated, see Tax losses carried forward to later income years at 13 Losses Information in the Company tax return instructions 2016 (NAT 0669).

    6 Net capital losses transferred from joining entities (including head company) at consolidation

    You only need to complete item 6 if your group consolidated during 2015–16.

    • Do not include tax losses or film losses at item 6.
    • Show tax losses transferred from joining entities (including head company) at consolidation at item 1.
    • Do not include net capital losses transferred after consolidation; include these losses at item 7.
    • Net capital loss has the meaning given by sections 102-10 and 165-114 of the ITAA 1997.
    • Do not include net capital losses if this item was completed in an earlier income year.

    This item requires information on the amount of net capital losses transferred from joining entities, including the head company, to the head company at the date the consolidated group has been brought into existence, that is, the date specified in the notice of choice given to the Commissioner; see section 703-50 of the ITAA 1997.

    Write the relevant amount of net capital losses transferred at consolidation at A, B or C, depending on which loss transfer test, if any, has been satisfied.

    Continuity of ownership test losses – companies only

    Write at A those net capital losses that were transferred at consolidation because the continuity of ownership and control tests were satisfied for the ownership test period; that is, from the start of the year when the net capital loss was made until immediately after the joining time; see sections 165-96 and 707-120 of the ITAA 1997.

    Same business test losses – companies only

    Write at B those net capital losses that were transferred at consolidation where the continuity of ownership and control tests were failed, but the joining company satisfied the same business test.

    Other losses - trusts only

    Write at C those net capital losses that were transferred at consolidation by a trust.

    Example 3

    A consolidated group came into existence on 10 March 2016. During the 2015–16 income year, the following net capital losses were transferred to the head company from joining entities that passed the loss transfer tests indicated.

    Joining entity

    Joining time

    Net capital loss amount
    $

    Transfer test passed

    Continuity of ownership

    Same business

    Company A

    10/3/2016

    900

    X

    Company B

    10/3/2016

    1,800

     

    Company C

     9/4/2016

    3,200

     

    Fixed trust X

    10/3/2016

    2,400

     

     

    Non-fixed trust Y

    10/3/2016

    1,100

     

     

    The head company completes item 6 part A on the schedule as follows:

    Example of how the head company completes item 6 part A on the schedule

    End of example

    As Company C's continuity of ownership net capital losses were transferred after consolidation, the amount transferred is written at D item 7.

    7 Net capital losses transferred from joining entities after consolidation

    • Do not include tax losses or film losses, at item 7.
    • Show tax losses transferred from joining entities after consolidation at item 2.
    • Do not include net capital losses transferred at consolidation; include these losses at item 6.
    • Net capital loss has the meaning given by sections 102-10 and 165-114 of the ITAA 1997.
    • Do not include net capital losses transferred in an earlier income year.

    This item requires information on the amount of net capital losses transferred from joining entities to the head company after the date the consolidated group has been brought into existence; that is, the date specified in the notice of choice given to the Commissioner; see section 703-50 of the ITAA 1997.

    Write the relevant amount of net capital losses transferred during the income year at D, E or F, depending on which loss transfer test, if any, has been satisfied.

    Continuity of ownership test losses – companies only

    Write at D those net capital losses that were transferred after consolidation because the continuity of ownership and control tests were satisfied from the start of the year when the loss was incurred until immediately after the joining time.

    Same business test losses - companies only

    Write at E those net capital losses that were transferred after consolidation because the continuity of ownership and control tests were failed, but the joining company satisfied the same business test.

    Other losses - trusts only

    Write at F those net capital losses that were transferred after consolidation by a trust.

    Example 4

    A consolidated group came into existence on 1 July 2015. During the 2015–16 income year the following net capital losses were transferred to the head company from joining entities that passed the loss transfer tests indicated.

    Joining entity

    Joining time

    Net capital loss amount
    $

    Transfer test passed

    Continuity of ownership

    Same business

    Company X

    1/7/2015

    2,500

    X

    Company Y

    2/7/2015

    300

     

    Company Z

    3/2/2016

    4,800

    X

    Fixed trust A

    8/6/2016

    250

     

     

    Non-fixed trust B

    8/6/2016

    3,200

     

     

    The head company completes item 7 part A on the schedule as follows:

    Exampl eof how the head company completes item 7 part A on the schedule

    End of example

    As Company X's same business net capital losses were transferred at consolidation, the amount transferred is written at B item 6.

    8 Net capital losses applied

    • Do not include tax losses or film losses at item 8.
    • Show tax losses deducted at item 3.
    • Net capital loss has the meaning given by sections 102-10 and 165-114 of the ITAA 1997.
    • You may also need to complete a CGT schedule. For more information, see Guide to capital gains tax 2016 (NAT 4151).

    This item requires information on the amount of net capital losses applied. A head company applies a net capital loss to the extent that it is applied to reduce an amount of the head company's capital gains.

    Before applying a group net capital loss or a transferred net capital loss, a head company must pass the continuity of ownership and control tests or the same business test.

    The application of transferred net capital losses is generally subject to an available fraction which limits the annual rate at which these losses may be applied by the head company. For more information on ‘available fraction’ and its calculation see Subdivision 707-C of the ITAA 1997.

    Group

    Write at G the amount of group net capital losses applied. Group net capital losses are those net capital losses that have been generated by the consolidated group. Group net capital losses are effectively applied before transferred net capital losses.

    Transferred

    Write at I the amount of transferred net capital losses applied. Transferred net capital losses are net capital losses that have been made outside the consolidated group and transferred into the group from an entity when it joined the group. Transferred net capital losses applied on a concessional basis are also included at I.

    Total

    Write at J the total of G and I.

    9 Transferred net capital losses applied

    • Do not include transferred net capital losses applied in accordance with the concessional method. The concessional method is relevant to certain losses transferred before 1 July 2004 (see section 707-350 of the IT(TP)A).
    • Do not include group net capital losses (losses generated by a consolidated group) applied at item 9.
    • Do not include transferred tax losses or film losses deducted at item 9.
    • Show transferred tax losses deducted at item 4.
    • Net capital loss has the meaning given by sections 102-10 and 165-114 of the ITAA 1997.

    This item requires information on the amount of transferred net capital losses applied. A head company applies a net capital loss to the extent that it is applied to reduce an amount of the head company's capital gains.

    Write at A, D, G, J, M and P, as required, the TFNs of those joining entities that had net capital losses from their loss bundles applied to reduce capital gains using 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 net capital losses have been applied for more than six loss bundles, write the joining entities' TFNs for the six loss bundles that had the largest amounts of net capital losses applied.

    Write at 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 A, D, G, J, M and P, respectively.

    Complete each available fraction to three decimal places (for example, 0.475, 0.520, 0.700). However, where rounding to three decimal places would result in an available fraction of nil, consolidated groups are permitted to round the available fraction to the first non-zero digit; see subsection 707-320(4) of the ITAA 1997. Where the available fraction is less than 0.0005, the amount of 0.000 should be written at the relevant item. Where the available fraction is equal to or greater than 0.0005, but less than 0.001, the fraction is rounded up to 0.001.

    For more information about the calculation of the available fraction, see Subdivision 707-C of the ITAA 1997.

    Write at C, F, I, L, O and R, as required, the corresponding amount of transferred net capital losses applied from loss bundles of joining entities whose TFNs are recorded at A, D, G, J, M and P respectively.

    If net capital losses have been applied from more than six loss bundles, write the six largest amounts applied.

    10 Net capital losses carried forward to later income years

    • Do not include tax losses or film losses carried forward to later income years at item 10.
    • Write tax losses carried forward to later income years at item 5.
    • Net capital loss has the meaning given by sections 102-10 and 165-114 of the ITAA 1997.
    • The head company must keep a record of its net capital losses and account for any adjustments including those made by the ATO. These records must be retained for five years after a CGT event has occurred or the losses recouped, whichever is later.
    • If required, the head company must be able to demonstrate not only the balance of any net capital losses being applied or carried forward, but also how those net capital losses arose.
    Group

    Write at S the amount of group net capital losses carried forward to later income years under section 102-15 of the ITAA 1997. Group net capital losses are those net capital losses that have been generated by the consolidated group.

    Transferred

    Write at U the amount of transferred net capital losses carried forward to later income years under section 102-15 of the ITAA 1997. Transferred net capital losses are net capital losses that have been made outside the consolidated group and transferred into the group from an entity when it joined the group. Any concessional transferred net capital losses carried forward are also included at U.

    Total

    Write at V the total of S and U.

    Transfer this amount to V item 13 Net capital losses carried forward to later income years on your Company tax return 2016.

    11 If you completed item 4 or item 9 in part A, were the apportionment rules applied?

    You must complete this item if

    • transferred tax losses have been deducted, or
    • transferred net capital losses have been applied

    from any loss bundle applying the available fraction method.

    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 an injection of capital or a non-arm's length transaction; see subsection 707-320(2) of the 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.

    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 of the ITAA 1997 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 1 for the part of the head company's income year that is before the formation of the consolidated group.

    For more information, see section 707-335 of the ITAA 1997.

    Print X in the appropriate box at W

    Page 3 of the schedule

    Part B Cancellation of transfer of losses

    1 Has the head company cancelled the transfer of a loss?

    A head company can make a choice to cancel the transfer of a loss of a joining entity. If the choice is made, the loss cannot be used by any entity for an income year ending after the joining time; see sections 707-145 and 707-150 of the ITAA 1997.

    Print X in the appropriate box at A.

    If the answer is Yes, complete item 2.

    If the answer is No, go to Part C Ownership test and same business test.

    2 Details of cancellation of transfer of losses

    Write at B, D, F and H the TFNs of those joining entities that had transfers of one or more losses cancelled during the income year.

    If the transfer of losses was cancelled for more than four joining entities, write the TFNs for only the four joining entities that had the largest total amounts of cancellation of transfer of losses.

    Write at C, E, G and I, as required, the total amount of the cancellation of the transfer of one or more losses for joining entities whose TFNs are recorded at B, D, F and H respectively.

    Part C Ownership test and same business test

    1 For each joining company that transferred a same business test tax loss or same business test net capital loss to the head company, determine the year of income in which the joining company first failed the continuity of ownership or control tests. Against each of the listed years, show the total amount of losses which first failed the continuity of ownership or control tests that year.

    You need to complete item 1 only if your group consolidated during the 2015–16 income year.

    • Do not include transferred film losses at item 1.
    • Do not include losses transferred by a joining company that satisfied the continuity of ownership and control transfer tests at item 1.
    • Do not include losses transferred by a joining trust at item 1.

    The aim of item 1 is to find out (in respect of companies that transferred losses to a head company of a consolidated group because a same business transfer test was satisfied):

    • the period of time between the year of failure of the continuity of ownership or control transfer tests and the trial year, and
    • the losses that failed the continuity of ownership or control tests at the joining time and in the trial year.
    Year ownership test failed

    At the appropriate year, write the total amount of tax losses and net capital losses of joining companies that first failed the continuity of ownership or control tests in the income year, but satisfied the same business test. If there is no amount, leave blank.

    For the 2011-12 and earlier income years, write the total for those years.

    Example 5

    A consolidated group came into existence on 1 July 2015. During the 2015–16 income year, the following joining companies transferred tax losses and net capital losses because they satisfied the same business transfer test:

    Joining company

    Loss year

    Amount
    $

    Sort of loss

    Year of ownership change

    A

    1996-97

    1,000

    Tax

    1999–00

     

     

     

     

    2013-14

     

    2003–04

    50

    Net capital

    2014-15

    B

    2001–02

    350

    Tax

    2015-16

     

    2003–04

    400

    Net capital

    2015-16

    C

    2001–02

    550

    Net capital

    2012-13

    For the 2015–16 income year, the head company completes item 1 part C on the schedule as follows:

    SBIT44335_1

    End of example

    The amount of the tax loss incurred by Company A ($1,000) is written at N because the first change of ownership occurred during the 1999–00 income year.

    2 Amount of losses deducted/applied after consolidation, for which the continuity of ownership test is not passed but the same business test is satisfied

    Do not include film losses deducted at item 2.

    Do not include at item 2 losses deducted or applied for which the head company satisfied the continuity of ownership test.

    Write at item 2 the amount of tax losses deducted and net capital losses applied during the 2015–16 income year by the head company after consolidation, where the continuity of ownership test was not passed, but the same business test was satisfied.

    Tax losses

    Write at O the amount of tax losses deducted by the head company which did not satisfy the continuity of ownership and control tests, but did satisfy the same business test.

    Net capital losses

    Write at P the amount of net capital losses applied by the head company which did not satisfy the continuity of ownership and control tests, but did satisfy the same business test.

    Example 6

    A consolidated group came into existence on 1 July 2015. On that date the following losses were transferred to the head company from a joining company that satisfied the continuity of ownership and control transfer tests.

    Year loss incurred

    Sort of loss

    Amount
    $

    2000–01

    Tax

    1,200

    2001–02

    Net capital

    4,600

    During the period from the start of the loss year (1 July 2000) until immediately after the joining time (1 July 2015) there was a 40% change in the persons who controlled the voting power of the head company and had the rights to the company's dividends and capital distributions. The joining company was a 100% owned subsidiary of the head company during this period.

    For the 2015–16 income year, the consolidated group generates sufficient capital gains and other assessable income to enable the transferred tax and net capital losses to be fully deducted or applied using the available fraction method. On 1 August 2015, there is a 20% change in the persons who, at the start of the loss year, controlled the voting power of the head company and had rights to the company's dividends and capital distributions. The head company does not satisfy the continuity of ownership test because of the change of majority ownership on 1 August 2015; that is, combined ownership changes of 60% (40% + 20%). However, the head company satisfies the same business test because the consolidated group carried on the same business during the 2015–16 income year as it did immediately before the change of ownership.

    In determining whether a head company can deduct or apply a loss transferred to it from a joining company that passed the continuity of ownership and control tests, changes in ownership of the joining company before it joined the consolidated group are taken into account.

    The head company completes item 2 part C on the schedule as follows:

    Example of how the head company completes item 2 part C on the schedule

    End of example

    3 Amount of losses carried forward to later income years for which the same business test must be satisfied before they can be deducted/applied

    • Do not include film losses carried forward at item 3.
    • Do not include at item 3 losses carried forward to later income years for which the head company satisfies the continuity of ownership test.

    Write at item 3 the amount of tax losses and net capital losses carried forward to later income years for which the head company must satisfy the same business test to deduct or apply these losses.

    Tax losses

    Write at Q the amount of tax losses carried forward to later income years for which the head company must satisfy the same business test to deduct these losses.

    Net capital losses

    Write at R the amount of net capital losses carried forward to later income years for which the head company must satisfy the same business test to apply these losses.

    Example 7

    A consolidated group came into existence on 1 July 2015. On that date, tax losses of $2,200 were transferred to the head company from a joining company that satisfied the continuity of ownership and control transfer tests.

    For the 2015–16 income year, the consolidated group made a group tax loss of $1,700 and a group net capital loss of $3,500, which are carried forward to the 2016–17 income year.

    There was a change of majority ownership of the head company during the 2015–16 year, but this did not result in the head company joining another consolidated group. The head company must satisfy the same business test in later income years to deduct or apply the losses carried forward comprising tax losses of $3,900 ($2,200 + $1,700) and net capital losses of $3,500.

    The head company completes item 3 part C on the schedule as follows:

    Example of how the head company completes item 3 part C on the schedule

    End of example

    Part D Life insurance companies

    The head company of a consolidated group that has at least one member that is a life insurance company at any time during the income year is taken to be a life insurance company for the purposes of an income tax assessment.

    Part D must be completed where the head companies have the following losses carried forward to later income years in the complying superannuation class:

    • tax losses, or
    • net capital losses.

    Do not include tax losses or net capital losses of the complying superannuation class in other parts of the schedule.

    Show the tax losses deducted of the complying superannuation class (claimed as a deduction under section 320-141 of the ITAA 1997) in Life insurance companies taxation schedule.

    Complying superannuation class tax losses carried forward to later income years

    Write at T the amount of tax losses carried forward to later income years from the complying superannuation class. This includes prior year tax losses from the complying superannuation class carried forward if they have not been deducted.

    A life insurance company has a tax loss of the complying superannuation class for an income year if, in that income year, the company's complying superannuation deductions exceed the sum of the:

    • assessable income from the complying superannuation class
    • net exempt income that is attributable to the complying superannuation class of assets.
    Complying superannuation net capital losses carried forward to later income years

    Write at U the amount of net capital losses carried forward to later income years from the complying superannuation class. This includes prior year net capital losses from the complying superannuation class carried forward if they have not been applied.

    A life insurance company has a net capital loss from the complying superannuation class for the income year if, in that income year, the capital losses made from complying superannuation class of assets exceed all capital gains made from complying superannuation class of assets.

    Last modified: 26 May 2016QC 48082