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Amendments to the company loss recoupment rules
In the 2007 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 to ensure 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 the four classes of foreign income to which they related. As these changes apply from the first income year starting on or after 1 July 2008, they may affect your completion of the Consolidated groups losses schedule 2009.
For further information see Part E Foreign source losses.
Who must complete the consolidated groups losses schedule 2009?
A head company of a consolidated group or multiple entry consolidated (MEC) group that satisfies any one or more of the following tests must complete the Consolidated groups losses schedule 2009 (the schedule), and lodge it with the Company tax return 2009 (NAT 0656):
- The total of the group's tax losses and net capital losses carried forward to the 2009-10 income year is greater than $100,000.
- The total of its tax losses and net capital losses transferred from joining entities is greater than $100,000.
- The total of its utilised tax losses and net capital losses is greater than $100,000.
- The total of its foreign source losses carried forward to the 2008-09 income year is greater than $100,000.
- The deduction for its share of earlier year controlled foreign company (CFC) losses is greater than $100,000.
- Its share of CFC losses carried forward to later income years is greater than $100,000.
- It is a life insurance company and has a total of complying superannuation/first home savers account (FHSA) class tax losses and complying superannuation/FHSA net capital losses carried forward to the 2009-10 income year greater than $100,000.
The examples provided in these instructions are for illustration purposes only and, for simplicity, may use lower figures.
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A head company may need to complete the schedule for certain aspects of its net capital losses. While some of the information requested in the schedule is also requested in the Capital gains tax (CGT) schedule 2009 (NAT 3423) (CGT schedule), a head company that completes a consolidated groups losses schedule may also need to complete a CGT schedule.
If the head company completes the schedule for any aspect of its losses, it must complete all relevant parts of the schedule. For example, if a head company completes the schedule as a result of having tax losses and net capital losses carried forward to later income years greater than $100,000, it must also provide details of foreign source losses even if the total of these losses is less than $100,000.
Note: 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.
These instructions are based on provisions relating to consolidated groups. Some of those provisions are modified in Division 719 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to MEC groups.
Last modified: 25 Nov 2009QC 21738