ATO Interpretative Decision
ATO ID 2003/59 (Withdrawn)
Income Tax
Transfer of income tax losses: wholly owned groups - non-resident holding companyFOI status: may be released
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The ATOID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication.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.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Does Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997) allow the transfer of tax losses between a loss company and an income company if both are wholly-owned Australian resident subsidiaries of the same non-resident holding company and the conditions for transfer in the Subdivision are otherwise satisfied?
Decision
Yes. Subdivision 170-A of the ITAA 1997 does not require the holding company to be an Australian resident company and the status of the holding company as a non-resident does not prevent the loss company and income company from being members of the same 'wholly-owned group' as defined in section 975-500.
Facts
Company A (the 'loss company') and Company B (the 'income company') are resident Australian companies in accordance with paragraph (b) of the definition of 'resident' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Neither company is a 'prescribed dual resident' as defined in subsection 6(1) of the ITAA 1936.
The loss company has been a 100% subsidiary of a non-resident holding company since 1 July 1997. The income company has been a 100% subsidiary of the same non-resident holding company since 31 March 1998.
The loss company incurred tax losses as a result of its trading activities in the 2000 and 2001 income years. The income company generated profits in the 2001 income year from its trading activities.
Reasons for Decision
Subdivision 170-A of the ITAA 1997 contains a number of conditions that must be satisfied before tax losses can be transferred from a loss company to an income company.
In terms of residency, subsections 170-35(1) and 170-40(1) of the ITAA 1997 provide that the loss company and the income company must be Australian residents. However, there is no residency requirement in Subdivision 170-A of the ITAA 1997 that relates to the holding company of a loss company and an income company.
Furthermore, the status of the holding company as a non-resident does not prevent the loss company and income company from being members of the same wholly-owned group.
Section 975-500 of ITAA 1997 defines wholly-owned group as follows:
'Two companies are members of the same wholly-owned group if:
Under paragraph 975-500(b), there is no requirement that the 'third' company must be a resident.
Accordingly, the tax losses incurred in the 2000 and 2001 income years by the loss company can be transferred to the income company in respect of its 2001 income year, provided the other conditions for transfer in Subdivision 170-A are satisfied.
Date of decision: 21 November 2002Year of income: Year ending 30 June 2001
Legislative References:
Income Tax Assessment Act 1936
subsection 6(1)
Subdivision 170-A
subsection 170-35(1)
subsection 170-40(1)
section 975-500
paragraph 975-500(b)
Related Public Rulings (including Determinations)
Taxation Ruling TR 98/12
Keywords
Group company loss transfers
ISSN: 1445-2782
| Date: | Version: | |
| 21 November 2002 | Original statement | |
| You are here | 12 February 2010 | Archived |