ATO Interpretative Decision
ATO ID 2003/119 (Withdrawn)
Capital Gains Tax
Transfer of tax loss: written agreement - change to the amount of tax lossFOI status: may be released
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This ATO ID is withdrawn as it is a straight application of the law and does not contain an interpretative decision.This document incorporates revisions made since original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.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 170-50 of the Income Tax Assessment Act 1997 (ITAA 1997) to transfer a tax loss invalid, where the loss company is later found to have a lesser amount of tax loss available for transfer, than the amount stated in the agreement?
Decision
No. Section 170-65 of the ITAA 1997 deems the written agreement to be valid to the extent of the maximum amount of tax loss that the loss company can transfer to the income company.
Facts
Company L and Company G are members of the same wholly owned group of companies 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 $6,000 tax loss 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 comprised of a $4 000 net capital gain and $6,000 other net assessable income.
After the loss transfers Company L revised the amount of tax loss that was available for transfer to Company G under the relevant written agreement down to $2,000.
Reasons for Decision
Subsection 170-65(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 *income company in the *deduction 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 170-50 of the ITAA 1997 as the agreement to transfer $6,000 of tax loss is still effective in transferring $2,000 of tax loss to Company G.
Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
Subdivision 170-A
section 170-50
section 170-65
subsection 170-65(1)
section 170-150
Related Public Rulings (including Determinations)
Taxation Ruling TR 98/12
ATO ID 2003/120
ATO ID 2003/121
ATO ID 2003/122
Keywords
Group company loss transfers
ISSN: 1445-2782
| Date: | Version: | |
| 15 November 2002 | Original statement | |
| You are here | 15 January 2010 | Archived |