ATO Interpretative Decision

ATO ID 2003/123 (Withdrawn)

general

• This ATO ID is withdrawn as it is a straight application of the law and does not contain an interpretative decision.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.

Issue

Can a loss company validly transfer various amounts of tax losses to two or more income companies in a single document (the Document) for the purposes of section 170-50 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. As the Document satisfies the requirements of subsection 170-50(2) of the ITAA 1997, the fact that it incorporates several written agreements does not of itself invalidate those agreements.

Facts

The public officer of a loss company and the public officer of several income companies in a wholly owned group agreed for the loss company to transfer various amounts of tax loss incurred by the loss company to the several income companies in respect of an income year that ended after 30 June 1997.

Rather than preparing a separate written agreement for each loss transfer, the public officer for the loss company and the public officer for the several income companies, incorporated the relevant written agreements for the purposes of section 170-50 of the ITAA 1997 in the Document.

The Document was signed by the public officers of the loss company and the several income companies. It stated that various amounts of tax losses are transferred from the loss company to the income companies in accordance with the attached schedule.

The schedule specified for each loss transfer:

(i)

the income year of the transfer,

(ii)

the amount of tax loss being transferred,

(iii)

the name of the loss company, and

(iv)

the name of the income company.

Each written agreement that formed part of the Document was made within the requisite period specified in paragraph 170-50(2)(d) of the ITAA 1997.

In order to address the possibility that the loss company is subsequently found to have insufficient tax losses available to satisfy all of the several written agreements contained in the Document, the Document specified the order in which the tax loss agreements were entered into.

Reasons for Decision

Subsection 170-50(1) of the ITAA 1997 requires that a transfer of a tax loss must be made by a written agreement.

The ITAA 1997 does not prescribe that the written agreement must be in any particular form. However, subsection 170-50(2) of the ITAA 1997 states that the agreement must:

a)

specify the income year of the transfer (which may be earlier than the income year in which the agreement is made), and

b)

specify the amount of the *tax loss being transferred, and

c)

be signed by the public officer of each company.'

* Denotes a term defined in section 995-1 of the ITAA 1997

As the Document satisfies the above requirements of section 170-50 of the ITAA 1997, the fact that it incorporates several written agreements does not of itself invalidate those agreements.

Subdivision 170-A (sections 170-1 to 170-70) of the ITAA 1997 applies to assessments for the year ended 30 June 1998 and later income years.

Year of income:  Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   Subdivision 170-A
   section 170-50
   subsection 170-50(1)
   subsection 170-50(2)
   paragraph 170-50(2)(d)

Related Public Rulings (including Determinations)
Taxation Ruling TR 98/12

Related ATO Interpretative Decisions
ATO ID 2003/78
ATO ID 2003/124

Keywords
Losses CoE
Company losses
Group company loss transfers
Losses
Carry forward losses
Current year losses

Business Line:  Losses and CGT Centre of Expertise

Date of publication:  15 March 2003

ISSN: 1445-2782