• Page 2 of the schedule

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    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 utilised.
    • If required, the head company must be able to demonstrate not only the balance of any tax losses being utilised or carried forward, but also how those tax losses arose.
    • Include the foreign loss components of tax losses - see Part E Foreign source losses.

    Group

    Write at S the amount of group tax losses, including the foreign losses components 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, including the foreign losses components 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 13Tax losses carried forward to later income years on your Company tax return 2012.

    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 2012 (NAT 0669).

    Example 5

    AAA consolidated group came into existence on 1 July 2003. On that date. tax losses of $2,500 were transferred to the head company from joining entities that satisfied the continuity of ownership and control transfer tests.

    No other losses were transferred to the head company. AAA group determined that $900 of the tax losses transferred satisfied the conditions for use of the concessional method and the head company made a choice to apply this method for all the eligible losses. The balance of the losses transferred ($1,600) was to be utilised applying the available fraction method.

    Up to the 2010-11 income year, the head company of the AAA group utilised $600 of the transferred tax losses using the concessional method and $800 of the transferred tax losses applying the available fraction method.

    The head company of the AAA group made a group tax loss in the 2008-09 income year of $200 and a group tax loss of $300 in the 2011-12 income year and is not able to use any of the transferred tax losses in those two years.

    The head company completes item 5 part A on the schedule as follows:

    The head company completes item 5 part A on the schedule

    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 2011-12.

    • Do not include tax losses, film losses or converted foreign source losses at item 6.
    • Show tax losses, including foreign loss components of 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.

    When an entity joins a consolidated group as a subsidiary member part way through the entity's income year, it calculates its taxable income or loss for the period up to the time it joins the group. Generally, any unused carry forward net capital losses are transferred to the head company if those losses could have been utilised by the joining entity, assuming sufficient capital gains, in the 'trial year', which generally begins 12 months before joining the consolidated group and ends immediately after the joining time. In certain circumstances, the trial year may be a period shorter than 12 months - see subsection 707-120(2) of the ITAA 1997.

    Whether the net capital losses could have been utilised by the joining entity in the trial year is determined by applying modified versions of the usual tests for applying net capital losses.

    A joining entity is any eligible entity that joins a consolidated group. For details of who can and cannot be members of a consolidated group, see sections 703-15 and 703-20 of the ITAA 997.

    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.

    The following conditions apply:

    • There must be persons who beneficially owned (between them) shares carrying (between them) the right to exercise more than 50% of the voting power in the company, and rights to receive more than 50% of the company's dividends, and rights to receive more than 50% of the company's capital distributions at all times during the ownership test period - see sections 165-150 to 165-160 of the ITAA 1997.
    • Alternatively, it is reasonable to assume that there are persons (none of them companies or trustees) who between them have beneficial interests (directly or indirectly through one or more interposed entities) in shares in the company carrying (between them) a majority of the voting power, and rights to dividend and capital distributions at all times during the ownership test period - see sections 165-150 to 165-160 of the ITAA 1997.
    • Where net capital losses are applied in an income year ending after 21 September 1999, the company must meet the 'same share and interest' requirement, except where the 'saving' rule applies - see section 165-165 and subsection 165-12(7) of the ITAA 1997.

    A modified version of the above rules can apply to widely held companies and eligible Division 166 companies - see Division 166 of the ITAA 1997.

    Anti-avoidance provisions are in Subdivision 175-CA 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.

    The following table shows how the same business test applies for companies joining a consolidated group - see subsections 707-120(1) and (3) and subsections 707-125(1) to (3) of the ITAA 1997.

    Same business transfer tests for companies

    In these circumstances:

    Test the joining entity's business at these points:

    1 The joining entity made the net capital loss for an income year starting after 30 June 1999

    • just before the end of the income year in which the loss was made
    • the year of the ownership change, if that year started before the trial year, and
    • the trial year.
     

    2 The joining entity made the net capital loss for an income year starting before 1 July 1999

    • just before the time of the ownership change, and
    • the trial year.
     

    For the purposes of the table, the time of the ownership change refers to the time when the joining entity first fails the ownership or control tests or, where the company is unable to point to the actual time the ownership test was failed, the relevant default test time shown in the table in subsection 165-13(2) of the ITAA 1997.

    Where a net capital loss is transferred as a result of satisfying the same business test, it may only be transferred again if, in addition to satisfying the usual transfer tests, the entity transferring the loss carried on the same business at these times:

    • just before the end of the income year in which the loss was previously transferred to it, and
    • during the trial year.

    See subsection 707-135(2) of the ITAA 1997.

    Under the same business test, the company must carry on the same business at all the times indicated in the preceding table; that is, throughout the trial year and year of ownership change (if applicable) and the other relevant time. The test is not satisfied if at any time the company did not carry on the same business as it did at another required time or it derives assessable income from:

    • a business of a kind that it did not carry on before the relevant time, or
    • a transaction of a kind that it did not enter into in the course of its business operations before the relevant time.

    'Same' means 'identical' and not merely 'similar'. The term 'same business' is to be read as referring to the same business in the sense of the identical business. However, the term does not mean identical in all respects.

    A company may expand or contract its activities without necessarily ceasing to carry on the same business. The organic growth of a business does not necessarily cause the business to fail the same business test, provided the business retains its identity.

    However, if through a process of evolution a business changes its essential character, the entity may fail the test. Application of the same business test is a question of fact and is usually determined by a process of weighing up various relevant factors.

    For more information, see sections 165-13 and 165-210 of the ITAA 1997; and also Taxation Ruling TR 1999/9, and Taxation Ruling TR 2007/2.

    Other losses - trusts only

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

    Example 6

    A consolidated group came into existence on 10 March 2012. During the 2011-12 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

    10.3.2012

    900

    X

    Company B

    10.3.2012

    1,800

     

    Company C

     9.4.2012

    3,200

     

    Fixed trust X

    10.3.2012

    2,400

       

    Non-fixed trust Y

    10.3.2012

    1,100

       

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

    The head company completes item 6 part A on the schedule

    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, including foreign loss components of tax losses or film losses, at item 7.
    • Show tax losses, including foreign loss components of 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.

    When an entity joins a consolidated group it calculates its taxable income or tax loss for the period up to the time it joins the group. Generally, any unapplied net capital losses are transferred to the head company if the losses could have been utilised by the joining entity, assuming sufficient capital gains, in the 'trial year', which generally begins 12 months before joining the consolidated group and ends immediately after the joining time. In certain circumstances, the trial year may be a period shorter than 12 months - see subsection 707-120(2) of the ITAA 1997.

    Whether the net capital losses could have been utilised by the joining entity in the trial year is determined by applying modified versions of the usual tests for applying net capital losses.

    A joining entity is any eligible entity that joins a consolidated group. For details of who can and cannot be members of a consolidated group, see sections 703-15 and 703-20 of the ITAA 1997.

    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.

    For more information on the continuity of ownership and control tests, see 6 Net capital losses transferred from joining entities (including head company) at consolidation in part A.

    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.

    For more information on the same business test, see 6 Net capital losses transferred from joining entities (including head company) at consolidation in part A.

    Other losses - trusts only

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

    Example 7

    A consolidated group came into existence on 1 July 2011. During the 2011-12 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

    1.7.2011

    2,500

    X

    Company Y

    2.7.2011

    300

     

    Company Z

    3.2.2012

    4,800

    X

    Fixed trust A

    8.6.2012

    250

       

    Non-fixed trust B

    8.6.2012

    3,200

       

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

    The head company completes item 7 part A on the schedule

    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 utilised

    • Do not include tax losses, including foreign loss components of tax losses or film losses, at item 8.
    • Show tax losses, including foreign loss components of tax losses, utilised 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 2012 (NAT 4151).

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

    Generally, a head company makes a capital gain or capital loss if certain events (called CGT events) happen. For more information about CGT events, see Guide to capital gains tax 2012. This publication includes:

    • a capital gain or loss worksheet for calculating a capital gain or capital loss for each CGT event, and
    • a CGT summary worksheet for calculating the company's net capital gain or capital loss.

    A head company may be entitled to utilise carry-forward losses broadly comprising:

    • losses generated by the consolidated group (group losses) and
    • transferred losses that were generated by an entity before it became a member of the group.

    Before utilising a group loss or a transferred loss, a head company is required to pass the continuity of ownership and control tests or the same business test.

    For more information on the conditions applying to the continuity of ownership test, see 6 Net capital losses transferred from joining entities (including head company) at consolidation in part A.

    For more information on the same business test, see sections 165-13 and 165-210 of the ITAA 1997; and also Taxation Ruling TR 1999/9, and Taxation Ruling TR 2007/2.

    The operation of the continuity of ownership test for transferred losses is modified by Subdivision 707-B of the ITAA 1997. Firstly, the loss year is modified so that it starts from when the loss was transferred to the head company. However, subsection 707-140(2) of the ITAA 1997 provides that the head company is not prevented from utilising the loss for the income year in which the transfer occurs. Secondly, in determining whether a head company can utilise a net capital loss transferred to it after passing the continuity of ownership and control tests, changes in ownership of a loss company before it joined the consolidated group are recognised - see section 707-210 of the ITAA 1997.

    Net capital losses generated by a consolidated group (group losses) are effectively utilised before transferred net capital losses - see paragraph 707-310(3)(b) of the ITAA 1997.

    Concessional net capital losses are used after group net capital losses, and are effectively used before other transferred net capital losses - see subsections 707-350(2) and (4) of the IT(TP)A.

    All losses transferred to a head company, for the first time from the entity that actually made them, constitute a bundle of losses. Losses in the bundle will be categorised by the 'sort of loss', such as a tax loss or net capital loss - see section 707-315 of the ITAA 1997.

    Available fraction

    An available fraction is worked out for each loss bundle. The available fraction limits the annual rate at which the bundle's losses may be recouped by the head company.

    Where losses are transferred for the first time, the available fraction is calculated as follows:

    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

    The modified market value of a joining entity is the amount that would be the market value of the entity at the joining time if:

    • the entity has no losses and the balance of its franking account is nil
    • the subsidiary members of the group at the time are separate entities and not divisions or parts of the head company of the group
    • the entity's market value did not include an amount attributable (directly or indirectly) to a membership interest in a member of the group (other than the entity) that is a corporate tax entity or an entity that transferred losses to the head company, and
    • a trust (other than a corporate tax entity or a trust with losses) contributes to the joining entity's market value only to the extent attributable to fixed entitlements (at the joining time) to income or capital of the trust that is not attributable (directly or indirectly) to membership interests in another member of the group that is a corporate tax entity or a trust with losses.

    See section 707-325 of the ITAA 1997.

    An increase in the value of the loss entity is excluded from the entity's modified market value if the increase results from either of these events:

    • an injection of capital into the loss entity, its associate or, if the loss entity is a trust, an associate of the trustee, or
    • a non-arm's length transaction that involved the loss entity, its associate or, if the loss entity is a trust, an associate of the trustee.

    The rules apply to events that occur in the four years before the loss entity joins the group - see subsections 707-325(2) and (4) of the ITAA 1997; and also Taxation Ruling TR 2004/9.

    The head company's adjusted market value at the initial transfer time is the amount that would be the market value at that time if:

    • the head company did not have a loss of any sort for an income year ending before that time, and
    • the balance of the head company's franking account was nil at that time.

    See subsection 707-320(1) of the ITAA 1997. The value of the head company is worked out on the basis that subsidiary members of the consolidated group are part of the head company.

    The Commissioner has a statutory obligation to ensure compliance with the market valuation requirements of the consolidation regime and to form a view as to whether valuations undertaken are accurate. Our online guide, Market valuation for tax purposes, will help you meet your tax obligations.

    The available fraction is adjusted if certain events happen, for example, the consolidated group acquires a new loss entity or the sum of the available fractions in the group exceeds 1 - see subsection 707-320(2) of the ITAA 1997.

    The use of transferred losses is apportioned when their available fraction applied for only part of the income year or when the available fraction changes during the income year - see section 707-335 of the ITAA 1997.

    Apply the available fraction using the following three-step process:

    1. Work out the amount of each category of the group's income or gains as specified in column 2 of the table in subsection 707-310(3) of the ITAA 1997. This is the group's total income or gains for each category less relevant deductions including group losses and concessional losses - but not transferred losses, the use of which is limited by their available fraction.
    2. Multiply each category amount by the bundle's available fraction. The result is taken to be the head company's only income or gains for that category.
    3. On the basis of the step 2 assumption, work out a notional taxable income for each loss bundle.

    This process enables the head company to determine the amount of transferred losses of each sort it can use from the loss bundle to determine its actual taxable income.

    An example of applying the available fraction using the three-step process is at Example 11.

    Group

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

    Transferred

    Write at I the amount of transferred net capital losses utilised. 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 utilised on a concessional basis are also included at I.

    Total

    Write at J the total of G and I.

    9 Transferred net capital losses utilised

    • Do not include transferred net capital losses utilised in accordance with the concessional method.
    • Do not include group net capital losses (losses generated by a consolidated group) utilised at item 9.
    • Do not include transferred tax losses, including foreign loss components of tax losses, or film losses utilised at item 9.
    • Show transferred tax losses utilised at item 4
    • Net capital loss has the meaning given by sections 102-10 and 165-114 of the ITAA 1997.
    • If donated net capital losses have been utilised, see the Donated net capital losses box.

    This item requires information on the amount of transferred net capital losses utilised. A head company utilises 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 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 net capital losses have been utilised 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 utilised.

    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. However, if net capital losses in a loss bundle are utilised with different available fractions (because losses have been 'donated' to other loss bundles), each of the amounts utilised is to be considered separately - see the Donated net capital losses box.

    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 greater than 0.0005, but less than 0.001, the fraction is rounded up to 0.001

    Where losses are transferred for the first time, the available fraction is calculated as follows:

    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 8 Net capital losses utilised in part A.

    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) write the adjusted available fraction applicable at the end of the income year.

    An available fraction cannot be a negative amount or greater than 1.

    If the sum of the group's available fractions would total more than 1, each available fraction is proportionally reduced - see subsection 707-320(2) of the ITAA 1997.

    The available fraction for a bundle is adjusted or maintained when one of five adjustment events listed in the table in section 707-320(2) of the ITAA 1997 occurs.

    For more information regarding the calculation of the available fraction, see 8 Net capital losses utilised in part A.

    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, write the increased available fraction.

    Write at C, F, I, L, O and R, as required, the corresponding amount of transferred net capital losses utilised 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 utilised from more than six loss bundles, write the six largest amounts utilised.

    >Donated net capital losses

    • If one company (the value/loss donor) has donated some of its net capital 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 net capital losses in the amounts shown for real loss-makers at any of C, F, I, L, O and R as required.
    • Show donated net capital 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 net capital 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 net capital losses utilised and non-transferable net capital losses utilised, multiple entries are required for the value/loss donor company. Show the donated net capital losses utilised with the available fraction of the real loss-maker. Show the non-transferable net capital losses utilised with the available fraction of the value/loss donor.

    Example 8

    A wholly owned group consists of a head company, Company H, and two subsidiary companies, Company X and Company Y. The group consolidated on 1 July 2003.

    Net capital losses were transferred from Company X and Company Y to Company H at the time the group formed on 1 July 2003.

    It was determined that the conditions for the value donor concession were satisfied. Modified market value has been donated to Company X from both Company H and Company Y. The available fractions that were worked out, after applying the value donor concession, are as follows:

    Company X

    Company Y

    0.900

    0.100

    Details of subsidiary losses carried forward and companies to which they could have been transferred (assuming Subdivision 170-B of the ITAA 1997 had not been amended to provide only for transfers involving an Australian branch of a foreign bank) are as follows:

    Company

    Transferor TFN

    Net capital loss carried forward to 2010-11

    Transferable to:

    Company H

    Company X

    Company Y

    X

    222 222 222

    1,200

     

    Y

    333 333 333

    500

     
       

    300

    X

    X

     

    It was also determined that Company Y satisfied the loss donor conditions and its transferable net capital loss was donated to Company X to be used in accordance with Company X's increased available fraction. $500 of this loss was carried forward to the 2011-12 income year.

    For the 2011-12 income year, the consolidated group had capital gains of $2,000. The available fraction amount for each bundle is as follows:

    Loss bundle

    Income amount

    Multiplied by available fraction

    Available fraction amount for bundle

     

    $

     

    $

    X

    2,000

    0.900

    1,800

    Y

    2,000

    0.100

    200

    As a result, the consolidated group can utilise all of the net capital losses in Company X's bundle ($1,200) and can also utilise all of Company Y's transferable net capital loss ($500) because it is used in accordance with Company X's increased available fraction.

    Company Y's non-transferable net capital loss ($300) can only be utilised to the extent of $200. The remaining $100 of this loss will be carried forward to the 2012-13 income year.

    The head company, Company H, completes item 9 part A on the schedule as follows:

    The head company, Company H, completes item 9 part A on the schedule

    Example 9

    A consolidated group determined the following amounts of net capital losses utilised from eight loss bundles for the 2011-12 income year:

    Company

    Transferor TFN

    Available fraction

    Net capital losses utilised

    $

    A

    111 111 111

    0.129

    2,390

    B

    222 222 222

    0.011

    33

    C

    333 333 333

    0.324

    3,950

    D

    444 444 444

    0.175

    4,655

    E

    555 555 555

    0.000

    1,920

    F

    666 666 666

    0.157

    3,515

    G

    777 777 777

    0.083

    1,250

    H

    888 888 888

    0.108

    4,975

    Company C and Company E have satisfied the value donor and loss donor conditions. Company E has donated its entire modified market value to Company C and also donated transferable losses to Company C, the real loss-maker. Company C's increased available fraction is 0.324 and Company E's reduced available fraction is 0.000.

    The head company completes item 9 part A on the schedule as follows:

    The head company completes item 9 part A on the schedule

    Information has been recorded for the loss bundles that had the six largest amounts of net capital losses utilised.

    Company E's donated net capital losses are shown against its TFN, not the TFN of the real loss-maker, Company C. The available fraction recorded for the value/loss donor, Company E, for the donated net capital losses is the increased available fraction of the real loss-maker company, Company C, not Company E's reduced available fraction of nil.

    10 Net capital losses carried forward to later income years

    • Do not include tax losses, including foreign loss components of tax losses, or film losses carried forward to later income years at item 10.
    • Write tax losses, including foreign loss components of 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 utilised 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 13Net capital losses carried forward to later income years on your Company tax return 2012.

    Example 10

    XYZ consolidated group came into existence on 1 July 2003. On that date, net capital losses of $2,100 were transferred to the head company from joining entities that satisfied the continuity of ownership and control transfer tests. No other losses were transferred to the head company. XYZ group determined that $1,200 of the net capital losses transferred satisfied the conditions for use of the concessional method and the head company made a choice to apply this method for all the eligible losses. The balance of the losses transferred ($900) was to be utilised applying the available fraction method.

    Up to the 2010-11 income year, the head company of the XYZ group utilised $800 of the transferred net capital losses using the concessional method and $700 of the transferred tax losses applying the available fraction method.

    The head company of the XYZ group made a group net capital loss of $200 in the 2010-11 income year and a group net capital loss of $300 in the 2011-12 income year and was not able to utilise any of the transferred net capital losses in those two income years.

    The head company completes item 10 part A on the schedule as follows:

    The head company completes item 10 part A on the schedule

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

    If transferred tax losses or transferred net capital losses have been utilised from any loss bundle applying the available fraction method, you must complete this item.

    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.

    Note: 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.

    See section 707-335 of the ITAA 1997.

    Print X in the appropriate box at W.

    >Example 11

    Applying the available fraction using the three-step process

    XYZ consolidated group is working out the group's taxable income for the 2011-12 income year.

    For the 2011-12 income year the group had capital gains of $900 and capital losses of $200. The group's only other assessable income was $9,000. Deductions relating to that income are $990.

    The group has a tax loss carried forward from the previous income year of $60.

    The group's remaining transferred losses at that time, and their available fractions, are set out in the table below.

    The continuity of ownership and control tests or same business tests are passed in respect of the recoupment of all these losses.

    Loss bundle

    Available fraction

    Unused transferred losses

    Bundle 1

    0.146

    $50 net capital losses

    $3,000 tax losses (not film)

    Bundle 2

    0.214

    $100 net capital losses

    $5,000 tax losses (not film)

    Step 1: Work out the categories of group income or gains.

    Income or gains

    Amount excluding group losses

    Less: Other allowable deductions and reductions

    Less: Group and concessional losses of that sort

    Column 5 Income and gains available for the bundle Head Company

     

    $

    $

    $

    $

    Capital gains

    900

    200

    0

    700

    Other assessable income

    9,000

    990

    60

    7,950

    Step 2: Calculate the fraction of the income and gain that is attributable to each bundle.

    Column 1 Income or gains

    Loss bundle

    Column 5 amount

    Multiplied by available fraction

    Available fraction amount for bundle

       

    $

     

    $

    Capital gains

    Bundle 1

    700

    0.146

    102

     

    Bundle 2

    700

    0.214

    150

    Other assessable income

    Bundle 1

    7,950

    0.146

    1,161

     

    Bundle 2

    7,950

    0.214

    1,701

    STEP 3(a): Work out a notional taxable income for bundle 1.

    As a result of step 2, it is assumed that XYZ group's only capital gain is $102. On the basis of that assumption, the whole of the $50 net capital loss from bundle 1 can be used. This results in a (notional) net capital gain for bundle 1 of $52 ($102 - $50).

    Notional taxable income for bundle 1:

    Assessable income

    $

    Deductions

    $

    Net capital gain

    52

    Tax losses
    (bundle 1)

    1,213

    Other assessable income

    1,161

       

    Total

    1,213

    Total

    1,213

    As a result, the XYZ group is able to use $1,213 of its tax losses from bundle 1.

    Step 3(b): Work out a notional taxable income for bundle 2.

    As a result of step 2, it is assumed that XYZ group's only capital gain is $150. On the basis of that assumption, the whole of the $100 net capital loss from bundle 2 can be used. This results in a (notional) net capital gain for bundle 2 of $50 ($150 - $100).

    Notional taxable income for bundle 2:

    Assessable income

    $

    Deductions

    $

    Net capital gain

    50

    Tax losses (bundle 2)

    1,751

    Other assessable income

    1,701

       

    Total

    1,751

    Total

    1,751

    So, the XYZ group is able to use $1,751 of its tax losses from bundle 2.

    Determine XYZ group's actual taxable income or gain.

    First work out XYZ group's net capital gain.

    Capital gain

    $

    Capital losses

    $

    Capital gain

    900

    Group capital losses

    200

       

    Net capital losses:

     
       

    (bundle 1)

    50

       

    (bundle 2)

    100

    Total

    900

    Total

    350

    XYZ group's net capital gain is $550 ($900 - $350).

    Assessable income

    $

    Deductions

    $

    Net capital gain

    550

    Deductions

    990

    Other assessable income

    9,000

    Group losses

    60

           
       

    Tax losses:

     
       

    (bundle 1)

    1,213

       

    (bundle 2)

    1,751

    Total

    9,550

    Total

    4,014

    XYZ group's taxable income is $5,536 ($9,550 - $4,014).

    Last modified: 30 May 2012QC 25834