Income Tax (Consequential Amendments) Act 1997 (39 of 1997)

Schedule 4   Consequential amendments of the Financial Corporations (Transfer of Assets and Liabilities) Act 1993

24   After section 26

Insert in Division 8:

Subdivision B - Tax losses and the Income Tax Assessment Act 1997

26A Application of this Subdivision

This Subdivision applies to assessments for the 1997-98 income year or a later income year.

26B Transfer of tax loss from transferring corporation to receiving corporation

In addition to its effect apart from this section, the Income Tax Assessment Act 1997 also has the effect it would have if Subdivision 170-A (which is about transferring tax losses within wholly-owned company groups) of that Act were replaced by Subdivision 170-A (which is a modified version of the rules in that Subdivision) in Schedule 1 to this Act.

26C Deduction for tax loss - easing of restrictions on transferring corporation

If:

(a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and

(b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under section 80G of the Income Tax Assessment Act 1936 or Subdivision 170-A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year ); and

(c) the loss year is the income year in which section 26 of this Act commenced or an earlier income year; and

(d) Subdivision 165-A or 175-A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year ); and

(e) the transferring corporation did not, at any time in the deduction year, derive income from:

(i) a business of a kind that it did not carry on; or

(ii) a transaction of a kind that it had not entered into in the course of its business operations;

before the transfer, or the earliest of the transfers, occurred;

neither Subdivision 165-A nor 175-A of that Act prevents the transferring corporation from deducting that amount.

Note: Subdivision 165-A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.

Subdivision 175-A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.