ATO Interpretative Decision
ATO ID 2004/687 (Withdrawn)
Income Tax
Group company loss transfers: choice to deduct tax losses - limitation on amount transferredFOI status: may be released
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This ATO ID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Can the amount of tax loss transferred by a loss company to an income company under Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997) exceed the amount that, apart from the transfer, the loss company would carry forward to the next income year after deducting in the deduction year the maximum amount of tax losses that can be deducted under section 36-17 of the ITAA 1997?
Decision
No. In accordance with subsection 170-45(1) of the ITAA 1997, the loss company can only transfer an amount of tax loss not exceeding what it could carry forward to the next income year after deducting in the deduction year the maximum amount of tax losses that can be deducted under section 36-17 of the ITAA 1997.
Facts
A loss company incurred a tax loss of $9,000 for the 2001-02 income year.
For the 2002-03 income year, the loss company's total assessable income exceeds total deductions (except tax losses) by an amount of $6,000. The loss company derives no net exempt income.
The loss company chooses to deduct a nil amount of tax loss for the 2002-03 income year (the deduction year) under subsection 36-17(2) of the ITAA 1997.
For the 2002-03 income year, the loss company wishes to transfer this tax loss of $9,000 to an income company under Subdivision 170-A of the ITAA 1997. Both the loss company and income company satisfy the conditions for transfer under Subdivision 170-A of the ITAA 1997 as then applied.
Reasons for Decision
Subsection 170-45(1) of the ITAA 1997 provides that the amount of tax loss transferred cannot exceed the amount of the loss company's tax loss that, apart from the transfer, the loss company would carry forward to the next income year after deducting in the deduction year the maximum amount of tax losses that the loss company can deduct under section 36-17 of the ITAA 1997.
The maximum amount of tax loss that a loss company can deduct under subsection 36-17(2) of the ITAA 1997 for the 2002-03 income year is $6,000.
In accordance with subsection 170-45(1) of the ITAA 1997, the loss company may transfer an amount of tax loss not exceeding $3,000 (that is, $9,000 - $6,000) to an income company for the 2002-03 income year.
Date of decision: 11 August 2004Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
section 36-17
subsection 36-17(2)
Subdivision 170-A
subsection 170-45(1)
Keywords
Group company loss transfers
Tax loss
ISSN: 1445-2782
| Date: | Version: | |
| 11 August 2004 | Original statement | |
| You are here | 12 March 2010 | Archived |