INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

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  

Operative provisions

SECTION 165-115U   Adjusted unrealised loss  

165-115U(1)  


The question whether a company has an adjusted unrealised loss at an alteration time (the relevant alteration time ) is worked out in this way (the individual asset method ), unless the company chooses to work it out using the *global method (set out in subsection (1B)). Method statement

Step 1.

Work out under section 165-115V or 165-115W in respect of each *CGT asset that the company owned at the relevant alteration time any notional capital loss, notional revenue loss or trading stock decrease that the company has at that time in respect of the asset.

To the extent that a notional capital loss or a notional revenue loss in respect of an asset at the relevant alteration time reflected an amount that was counted at an earlier alteration time, do not count it again at the relevant alteration time.


Step 2.

Add up the notional capital losses and the notional revenue losses that the company had at the relevant alteration time. The total is the company ' s nominal unrealised loss at that time.


Step 3.

Add up the trading stock decreases that the company had at the relevant alteration time. The total is the company ' s overall trading stock decrease at that time.


Step 4.

The sum of the company ' s nominal unrealised loss and overall trading stock decrease at the relevant time is the company ' s adjusted unrealised loss at that time.

Note:

Certain alteration times are disregarded (see subsections 165-115K(2) and (4)).

165-115U(1A)  
Step 1 in the method statement in subsection (1) does not apply to an amount that was counted at an earlier alteration time if the company has chosen to use the *global method of working out whether it has an adjusted unrealised loss at that earlier time.

165-115U(1B)  


The global method of working out whether the company has an adjusted unrealised loss at the relevant alteration time is as follows: Method statement

Step 1.

Work out the total *market value of all *CGT assets that the company owned at the relevant alteration time (including those it *acquired for less than $10,000), using a valuation method that would generally be regarded as appropriate in the circumstances.


Step 2.

Work out the total of the *cost bases of those *CGT assets at the relevant time.

Note:

If a CGT asset that the company owned at the relevant time was also trading stock or a revenue asset at that time, see subsection (1C) of this section.


Step 3.

If the step 2 amount exceeds the step 1 amount, the excess is the company ' s adjusted unrealised loss at the relevant time.

165-115U(1C)  
If:


(a) a *CGT asset that the company owned at the relevant alteration time was also *trading stock or a *revenue asset at that time; and


(b) the asset ' s *cost base at the relevant alteration time is less than the amount that, if the relevant alteration time were a changeover time, would be compared under section 165-115F with the asset ' s *market value in working out a notional revenue gain or notional revenue loss that the company would have at the changeover time in respect of the asset;

then, for the purposes of step 2 of the method statement in subsection (1B) of this section, the amount that would be so compared is to be taken into account instead of that cost base.

165-115U(1D)  
A choice to use the *global method must be made on or before:


(a) the day on which the company lodges its *income tax return for the income year in which the relevant alteration time occurred; or


(b) such later days as the Commissioner allows.

165-115U(2)  
However, the company does not have an adjusted unrealised loss at the relevant alteration time if the company would, at that time, satisfy the maximum net asset value test under section 152-15 .


View surrounding sectionsView surrounding sectionsBack to top


This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.