Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 707 - Losses for head companies when entities become members etc.  

Subdivision 707-B - Can a transferred loss be utilised?  

Operative provisions

SECTION 707-210   Utilisation of certain losses transferred from a company depends on company that made the losses earlier  

707-210(1)    


This section has effect for the purposes of working out whether a company (the latest transferee ) can * utilise for an income year a loss it made because of a * COT transfer from a company (the latest transferor ).

707-210(1A)    


A transfer of a loss under Subdivision 707-A from a company to a company is a COT transfer of the loss if the transfer occurs because:


(a) the transferor meets the conditions in section 165-12 ; and


(b) the conditions in one or more of paragraphs 165-15(1)(a) , (b) and (c) do not exist in relation to the transferor.



Meeting conditions in section 165-12

707-210(2)    
The latest transferee is taken to meet the conditions in section 165-12 for the income year in relation to the loss if and only if the company (the test company ) described in subsection (3) would have met those conditions for the income year had the circumstances described in subsection (4) existed.

Note 1:

The latest transferee and the test company may be the same company.

Note 2:

Section 707-405 may affect the income year for which the test company is treated as having made the loss, if the loss is referable to part of an income year.


707-210(3)    
The test company is the first company to make the loss. However, if:


(a) the loss was made by the latest transferor because of one or more earlier transfers of the loss under Subdivision 707-A from a company to a company; and


(b) one or more of those earlier transfers was not a * COT transfer;

the test company is the company to which the loss was transferred in the most recent transfer described in paragraph (b).


707-210(4)    
The circumstances are that:


(a) the test company was not treated by Subdivision 707-A for the income year as not having made the loss; and


(b) if the test company made the loss apart from that Subdivision and transferred the loss to itself under that Subdivision - the test company was not treated by that Subdivision for the income year as having made the loss for the income year in which the transfer occurred; and


(c) nothing happened, after the time the loss was transferred from the test company to the * head company of a * consolidated group, to * membership interests or voting power:


(i) in an entity that was at that time a * subsidiary member of the group; or

(ii) in an entity that was at that time interposed between the test company and the head company;
that would affect whether the test company would meet the conditions in section 165-12 for the income year; and


(d) if the loss has later been transferred under that Subdivision to the head company of another consolidated group - nothing happened, after the time of the later transfer, to membership interests or voting power:


(i) in the later transferor; or

(ii) in an entity that was at that time interposed between the later transferor and the head company;
that would affect whether the test company would meet the conditions in section 165-12 for the income year.

Failing to meet conditions in section 165-12

707-210(5)    
The latest transferee is taken to fail to meet a condition in section 165-12 only at:


(a) the first time the test company would have failed to meet the condition had the circumstances described in subsection (4) existed; or


(b) the test time described in subsection 166-5(6) for the test company, if Division 166 is relevant to working out whether the test company could have * utilised the loss had the circumstances described in subsection (4) existed.



Business continuity test applying to latest transferee under Division 166

707-210(6)    


If subsection 166-5(5) affects whether the latest transferee can * utilise the loss for the income year because the latest transferee is a * widely held company or an * eligible Division 166 company, or both, during the year, subsection 166-5(6) operates as if it required the *business continuity test to be applied to the * business the latest transferee carried on just before the time described in subsection (5) of this section.

If the test company made the loss because of a transfer

707-210(7)    
If the test company made the loss because of a transfer under Subdivision 707-A from another entity, Divisions 165 and 166 operate in relation to the test company for the purposes of subsection (2) as if the test company ' s * loss year started at the time of the transfer.



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