Income Tax Assessment Act 1997



Division 165 - Income tax consequences of changing ownership or control of a company  

Subdivision 165-CD - Reductions after alterations in ownership or control of loss company  

Guide to Subdivision 165-CD

SECTION 165-115GC   How adjustments are calculated  

Adjustments are based on the overall loss of the company. This comprises its realised losses and unrealised losses on CGT assets.

Special rules, directed at saving compliance costs, apply to determine whether unrealised losses have to be counted at an alteration time and, if so, how to work them out.

The company may not have to calculate its unrealised losses if the alteration time is not also a changeover time for the purposes of Subdivision 165-CC (about change of ownership or control of a company that has an unrealised net loss), and the company has no realised losses.


The company does not have to count unrealised losses at an alteration time if (together with certain related entities) it has a net asset value of not more than $6,000,000 under the test in section 152-15 (for small business CGT relief).


In working out its unrealised losses on CGT assets, the company can choose to work out the *market value of each of its assets individually, or of all of its assets together.


If the company works out the *market value of each of its assets individually, unrealised losses on assets acquired for less than $10,000 do not have to be calculated at any time.


Amounts (whether realised or unrealised) counted at a previous alteration time are not counted again at a later alteration time. (This does not apply to unrealised losses worked out by reference to the *market value of all the company ' s assets together.)


However, if unrealised amounts are not counted at a previous alteration time (for example, because of the $10,000 exclusion, or because you satisfy the maximum net asset value test in section 152-15 ) and are not required to be taken into account in adjustments made at that time, they may be counted at a later time as part of a realised loss.

A formula is provided for making adjustments in straightforward cases if applying the formula gives a reasonable result having regard to the object of the Subdivision. Otherwise, reasonable adjustments must be made having regard to a number of stated factors.

To help entities to make the adjustments, any entity that, in its own right, has a controlling stake in the company is required to provide a written notice to its associates setting out relevant information. In limited circumstances, the company itself may have to provide a written notice to entities that, to its knowledge, have a significant equity or debt interest in it.

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