Tax Law Improvement Act (No. 1) 1998 (46 of 1998)

2   CGT (new Parts 3-1, 3-3 and 3-5)

2   Consequential amendment of the Income Tax Assessment Act 1997

47   After section 195-15

Insert:

Working out a PDF's net capital gain and net capital loss

195-25 Applying a PDF's net capital losses

If a company is a *PDF at the end of an income year for which it has a *net capital loss, it can apply the loss in working out its *net capital gain for a later income year only if it is a PDF throughout the last day of the later income year.

195-30 PDF cannot transfer net capital loss

If a company is a *PDF at the end of an income year for which it has a *net capital loss, it cannot transfer any amount of the loss under Subdivision 170-B (which is about the transfer of net capital losses within wholly-owned groups of companies).

195-35 Net capital loss for year in which company becomes a PDF

(1) This section applies if a company becomes a *PDF during an income year and is still a PDF at the end of it.

(2) Divide the income year into periods according to subsection 195-15(2) (about working out the company's tax loss for the income year).

(3) For each period, work out whether the company has a *net capital gain or a *net capital loss (or both), treating each period as if it were an income year.

(4) If the company has:

(a) a *net capital gain for the non-PDF period; and

(b) a *net capital loss for the PDF period;

that loss is a net capital loss of the company for the income year.

Note: The company can only apply the loss while it is a PDF: see section 195-25.

(5) If the company has a *net capital loss for the non-PDF period:

(a) section 195-25 does not prevent the company from applying its *net capital loss for the income year in working out its *net capital gain for a later income year; and

(b) section 195-30 does not prevent the company from transferring an amount of its net capital loss for the income year under Subdivision 170-B (which is about the transfer of net capital losses within wholly-owned groups of companies);

to the extent that its net capital loss for the income year does not exceed its net capital loss for the non-PDF period.

(6) These rules apply in addition to the other rules about how *net capital losses are applied or transferred.

The other rules start in Division 102 (about net capital gains and losses).

[The next Part is Part 3-45.]