ATO Interpretative Decision
ATO ID 2003/735 (Withdrawn)
Income Tax
Group company loss transfers: wholly owned groups - when loss company and gain company must be Australian residentsFOI 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This ATO ID is withdrawn as it is a straight application of the law and does not contain an interpretative decision.This document incorporates revisions made since original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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
To transfer a net capital loss pursuant to Subdivision 170-B of the Income Tax Assessment Act 1997 (ITAA 1997), is it necessary that the loss company must be an Australian resident throughout the loss year, and further, that the gain company must be an Australian resident throughout the application year?
Decision
Yes. Both the loss and gain companies must be Australian residents in accordance with paragraph 170-135(1)(a) and subsection 170-140(1) of the ITAA 1997 respectively.
Facts
A holding company (the loss company) is wholly-owned by non-resident entities and has a prior year net capital loss. A 100% subsidiary (the gain company) of the holding company made a net capital gain in an income year (the application year) that exceeds the amount of net capital loss available to the loss company. Both companies were incorporated in Australia before the commencement of the capital loss year and remained so throughout the period to the end of the application year.
Reasons for Decision
Subdivision 170-B of the ITAA 1997 contains a number of conditions that must be satisfied before net capital losses can be transferred from a loss company to a gain company. Specifically, paragraph 170-135(1)(a) and subsection 170-140(1) of the ITAA 1997 provide that the loss company and the gain company must be Australian residents throughout the capital loss year and the application year respectively.
There is no requirement that the underlying beneficial owners of the companies that form a wholly-owned group must be Australian residents. The definition of 'resident' in subsection 6(1) of the Income Tax Assessment Act 1936 extends to companies that are incorporated in Australia. Accordingly, as both companies were incorporated in Australia before the commencement of the capital loss year and remained so throughout the application year, they satisfy the residency requirements of paragraph 170-135(1)(a) and subsection 170-140(1) of the ITAA 1997 as outlined.
The loss company can therefore transfer the net capital loss to the gain company provided all other conditions for transfer in Subdivision 170-B of the ITAA 1997 are met.
Date of decision: 27 June 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1936
subsection 6(1)
Subdivision 170-B
subsection 170-140(1)
paragraph 170-135(1)(a) Related ATO Interpretative Decisions
ATO ID 2003/59
Keywords
Group company loss transfers
ISSN: 1445-2782
| Date: | Version: | |
| 27 June 2003 | Original statement | |
| You are here | 19 February 2010 | Archived |