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ATO Interpretative Decision

ATO ID 2003/121 (Withdrawn)

Capital Gains Tax

Transfer of net capital loss: written agreement - change to the amount of net capital loss
FOI status: may be released
  • This ATO ID is withdrawn as it is a straight application of the law and does not contain an interpretative decision.
    This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is a written agreement, under section 170-150 of the Income Tax Assessment Act 1997 (ITAA 1997) to transfer a net capital loss invalid, where the loss company is later found to have a lesser amount of net capital loss available for transfer, than the amount stated in that agreement?

Decision

No. Section 170-165 of the ITAA 1997 deems the written agreement to be valid to the extent of the maximum amount of net capital loss that the loss company can transfer.

Facts

Company L and Company G are members of the same wholly owned group at all relevant times.

For the purposes of Subdivisions 170-A and 170-B of the ITAA 1997 Company L is a 'loss company'. Company G is an 'income company' for the purposes of Subdivision 170-A and a 'gain company' for the purposes of Subdivision 170-B of the ITAA 1997.

Company L validly entered into a written agreement pursuant to section 170-50 of the ITAA 1997 to transfer an amount of tax loss of $6,000 to Company G for the deduction year.

On the same day, Company L also entered into a written agreement pursuant to section 170-150 of the ITAA 1997 to transfer $4,000 net capital loss to Company G for an application year that was the same as the deduction year.

For the relevant deduction/application year Company G had, at the time of entering into the relevant loss transfer agreements, a taxable income of $10,000 comprising a $4,000 net capital gain and $6,000 other net assessable income.

After the loss transfers Company L revised the amount of net capital loss that was available for transfer to Company G under the relevant written agreement, down to $2,000.

Reasons for Decision

Subsection 170-165(1) of the ITAA 1997 specifies that:

If the amount specified in an agreement exceeds the maximum amount that the loss company can transfer to the gain company in the application year, only that maximum amount is taken to have been transferred.

Therefore there is no need for Company L and Company G to prepare another loss transfer agreement under section 170 -150 of the ITAA 1997 as the agreement to transfer $4,000 net capital loss is still effective in transferring $2,000 net capital loss to Company G.

Note: Unless an additional tax loss or net capital loss is validly transferred to the Company G from Company L or another loss company(s) under either section 170-50 or 170-150 of the ITAA 1997, then Company G will have a taxable income of $2,000. The transfer of such an additional tax loss or net capital loss is dependent upon the Commissioner having allowed further time pursuant to paragraph 170-50(2)(d) or paragraph 170-150(2)(d) respectively of the ITAA 1997 in which to make such a transfer(s).

Date of decision:  15 November 2002

Year of income:  Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
   Subdivision 170-A
   section 170-50
   paragraph 170-50(2)(d)
   Subdivision 170-B
   section 170-150
   paragraph 170-150(2)(d)
   section 170-165
   subsection 170-165(1)

Related Public Rulings (including Determinations)
Taxation Ruling TR 98/12

Related ATO Interpretative Decisions
ATO ID 2003/119
ATO ID 2003/120
ATO ID 2003/122

Keywords
Group company loss transfers

Business Line:  Losses & CGT Centre of Expertise

Date of publication:  15 March 2003

ISSN: 1445-2782

history
  Date: Version:
  15 November 2002 Original statement
You are here 15 January 2010 Archived

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