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  • 4 Do current year loss provisions apply?

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    Warning:

    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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    Is the company required to calculate its taxable income or tax loss for the year under Subdivision 165-B or its net capital gain or net capital loss for the year under Subdivision 165-CB of the ITAA 1997?

    A company is required to calculate its taxable income and tax loss under Subdivision 165-B of the ITAA 1997 where it does not satisfy the continuity of majority ownership test for the whole income year - see section 165-35External Link of the ITAA 1997. The current year loss provisions also apply where, during the income year, a person begins to control, or becomes able to control, the voting power in the company for the purpose or one of the purposes of gaining an advantage under the ITAA 1997 or gaining such a benefit for someone else - see section 165-40External Link of the ITAA 1997.

    However, the current year loss rules do not apply in either case if the same business test is satisfied.

    If the current year loss provisions apply, the company calculates its taxable income and tax loss by dividing the income year into periods according to when the change in ownership or control took place. Each separate period is regarded as an income year, with a notional tax loss or notional taxable income calculated for each separate period.

    The company's tax loss for the income year - see section 165-70External Link of the ITAA 1997 - consists of the total of notional losses calculated under section 165-50 or 165-75 of the ITAA 1997.

    The current year loss rules in Subdivision 165-CB of the ITAA 1997, where applicable, determine the company's net capital gain and net capital loss for the income year. If the company is required to calculate its taxable income and tax loss for the income year under Subdivision 165-B of the ITAA 1997 then Subdivision 165-CB will automatically apply - see section 165-102External Link of the ITAA 1997. The company works out its net capital gain and net capital loss by dividing the income year into periods according to when the change in ownership or control took place.

    A notional net capital gain or notional net capital loss is calculated for each period.

    A company's net capital loss for the income year - see section 165-114External Link of the ITAA 1997 - consists of the total of notional net capital losses calculated under section 165-108 of the ITAA 1997.

    Print X in the Yes box at K if the company is required to calculate its taxable income or tax loss under the provisions of Subdivision 165-B or its net capital gain or net capital loss under the provisions of Subdivision 165-CB.

    Print X in the No box at K if the company is not required to calculate its taxable income or tax loss under the provisions of Subdivision 165-B or its net capital gain or net capital loss under the provisions of Subdivision 165-CB.

    Last modified: 27 Nov 2009QC 21731