ATO Interpretative Decision
ATO ID 2003/365 (Withdrawn)
Income Tax
Group company loss transfers: net capital loss of loss company - assessable income of income companyFOI status: may be released
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This ATO ID is a straight application of the law and does not contain an interpretive 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Can a loss company effectively transfer amounts of surplus prior year net capital losses to an income company to be applied against assessable income, as opposed to application in working out a net capital gain?
Decision
No. Subsections 170-145(5) and 102-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997) operate to deny a deduction from assessable income of a net capital loss for any income year.
Facts
Two Australian resident companies are members of the same wholly-owned group. One company (loss company) has surplus prior year net capital losses available for transfer in respect of an income year. The other company (income company) has made a net capital loss in that year and has ordinary assessable income that exceeds the amount of its net capital losses.
Reasons for Decision
Section 170-145 of the ITAA 1997 determines the maximum amount of net capital loss that can be transferred between group companies.
Pursuant to subsection 170-145(5) of the ITAA 1997, no amount of net capital loss can be transferred from the loss company to the income company if, apart from the operation of Subdivision 170-B of the ITAA 1997, the income company would not have a net capital gain for the income year. As the income company has no net capital gain for the income year, it follows that no amount of net capital loss can be transferred to the income company to be claimed as a deduction against assessable income.
Furthermore, the net capital losses of the income company cannot be claimed as deductions against its assessable income for any income year (subsection 102-10(2) of the ITAA1997).
Date of decision: 7 April 2003Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
section 170-145
subsection 102-10(2)
subsection 170-145(5)
Keywords
Group company loss transfers
Capital losses offset
ISSN: 1445-2782
| Date: | Version: | |
| 7 April 2003 | Original statement | |
| You are here | 18 December 2009 | Archived |