ATO Interpretative Decision
ATO ID 2003/494 (Withdrawn)
Income Tax
Meaning of tax loss: 'Saving Rule'- Part of tax loss transferred in an earlier income yearFOI status: may be released
-
This ATO ID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Where a Loss company has transferred part of its tax loss under Subdivision 170-A of the Income Tax Assessment 1997 (ITAA 1997) is the relevant 'tax loss' for the purposes of applying subsection 165-12(7) of the ITAA 1997 to the loss company the amount of the tax loss not transferred?
Decision
Yes. Pursuant to subsection 170-20(2) of the ITAA 1997 a loss company is taken not to have incurred the amount of tax loss that has been transferred under Subdivision 170-A of the ITAA 1997.
Facts
In the relevant loss year Loss Company incurred a tax loss of $100 under section 36-10 of the ITAA 1997.
In the first succeeding income year after the loss year, Loss Company could not deduct all or part of the $100 tax loss carried forward and transferred an amount of $70 under Subdivision 170-A of the ITAA 1997.
In the second succeeding income year after the loss year, Loss Company was not able to satisfy the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 because of the operation of the 'same share same interest rule' in section 165-165 of the ITAA 1997. Loss Company was not able to deduct the $30 tax loss carried forward unless the requirements of subsection 165-12(7) of the ITAA 1997 (the 'saving rule') were met enabling the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 to be treated as having been satisfied.
Reasons for Decision
Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied, only because of the operation of section 165-165 of the ITAA 1997, the condition can be taken as being satisfied where:
the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any direct or indirect equity interests in the company during the *ownership test period.
*denotes a term defined in subsection 995-1(1) of the ITAA 1997
In satisfying the 'less than 50% of the tax loss' requirement in subsection 165-12(7) of the ITAA 1997, the relevant tax loss amount is the Loss Company's tax loss as defined in section 36-10 of the ITAA 1997.
Pursuant to subsection 170-20(2) of the ITAA 1997, the Loss Company can no longer deduct the amount of tax loss transferred under Subdivision 170-A of the ITAA 1997, and is taken not to have incurred the tax loss to the extent of that amount. Accordingly the relevant tax loss amount is $30, that is, $100 less $70.
Date of decision: 23 May 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
section 36-10
subsection 165-12(2)
subsection 165-12(3)
subsection 165-12(4)
subsection 165-12(7)
section 165-165
Subdivision 170-A
subsection 170-20(2)
Keywords
Company losses
ISSN: 1445-2782
| Date: | Version: | |
| 23 May 2003 | Original statement | |
| You are here | 19 March 2010 | Archived |