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  • Introduction

    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

    What's new?

    Amendments to the company loss recoupment rules

    In the 2007 Federal Budget the Government announced changes to ensure that companies do not fail the continuity of ownership test because they have multiple classes of shares on issue, and that the entry history rule in the consolidation regime is disregarded in applying the same business test, with effect from 1 July 2002. At the time of publication these changes had not become law.

    Removal of quarantining of foreign tax losses

    The Tax Laws Amendment (2007 Measures No. 4) Act 2007 amended the income tax law to remove the quarantining of foreign losses, which were previously segregated into four classes of foreign income to which they related. As the commencement date for the changes will be the first income year starting on or after 1 July 2008, they will affect the completion of the Losses schedule 2009 (NAT 3425).

    For further information see Part E Foreign source losses.

    Who must complete a losses schedule?

    Do any of the following tests apply to your entity (company, trust or superannuation fund)?

    If so, complete and submit a losses schedule with your 2009 tax return.

    Test for completing losses schedule

    A losses schedule is required if the entity:

    Company

    Trust

    Fund

    has total of tax losses and net capital losses carried forward to the 2009–10 income year greater than $100,000

    Yes

    Yes

    Yes

    is required by section 165-13 of the Income Tax Assessment Act 1997 (ITAA 1997) to satisfy the same business test in Subdivision 165-E of that Act to apply a loss either in the 2008–09 income year or in a later income year or, having passed the continuity of ownership test, has claimed a deduction for tax losses and/or applied net capital losses greater than $100,000

    Yes

    -

    -

    is a listed widely held trust that is required by section 266-125 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) to satisfy the same business test in Subdivision 269-F of that Schedule to deduct a tax loss in the 2008–09 or later income years or, having passed the 50% stake test, has claimed a deduction for tax losses greater than $100,000

    -

    Yes

    -

    has a changeover time that occurred after 1.00pm by legal time in the Australian Capital Territory on 11 November 1999 and determined that it has an unrealised net loss as defined in the provisions of Subdivision 165-CC of the ITAA 1997

    Yes

    -

    -

    is a life insurance company and has either a complying superannuation/first home saver account (FHSA) class tax loss or a complying superannuation/FHSA net capital loss carried forward to the 2009–10 income year

    Yes

    Yes

    -

    has foreign source losses carried forward to the 2008–09 income year greater than $100,000

    Yes

    Yes

    Yes

    has a share in earlier year controlled foreign company (CFC) losses and the deduction for that share is greater than $100,000

    Yes

    Yes

    Yes

    has a share in current year CFC losses greater than $100,000

    Yes

    Yes

    Yes

    has a share in CFC losses carried forward to later income years greater than $100,000

    Yes

    Yes

    Yes

    An entity may need to complete a losses schedule for certain aspects of its net capital losses. While some of the information requested in the losses schedule is also requested in the Capital gains tax (CGT) schedule 2009 (NAT 3423) (CGT schedule), an entity that completes a losses schedule may also need to complete a CGT schedule.

    If the entity completes a losses schedule in respect of any aspect of its losses, all relevant parts of the schedule must be completed. For example, if the entity completes a schedule as a result of foreign source losses and has both tax losses and net capital losses carried forward to later income years, details of such losses are required even if the total of these losses is not greater than $100,000.

    As the changes to the foreign loss provisions apply from the first income year starting on or after 1 July 2008, entities with early substituted accounting periods do not need to fill out Part E of the schedule as these changes do not apply to early balancers until their 2010 income year.

    An entity that has joined a consolidated group as a subsidiary member during the year of income must lodge a losses schedule covering any non-membership period(s) if the entity satisfies any of the requirements for lodgment of that schedule including where losses exceed $100,000 at the end of the non-membership period. The amounts at part A of the losses schedule are required to be transferred to U and V item 13 on the Company tax return 2009 (NAT 0656).

    Last modified: 27 Nov 2009QC 21731