ATO Interpretative Decision

ATO ID 2003/258 (Withdrawn)

Income Tax

CGT: Bankruptcy - prior year net capital losses disregarded
FOI status: may be released

This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.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.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

If during an income year a taxpayer was released from certain debts under Part X of the Bankruptcy Act 1966 does subsection 102-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) prevent the taxpayer from taking into account a net capital loss made in an earlier income year in working out whether they made a net capital gain for the income year or any later income year?

Decision

Yes. If during an income year a taxpayer was released from certain debts under Part X of the Bankruptcy Act 1966 subsection 102-5(2) of the ITAA 1997 prevents the taxpayer from taking into account a net capital loss made in an earlier income year in working out whether they made a net capital gain for the income year or any later income year.

Facts

The taxpayer made a net capital loss during the 2000-2001 income year.

During the 2001-2002 income year the taxpayer was released from certain debts under Part X of the Bankruptcy Act 1966.

Reasons for Decision

Under subsection 102-5(1) of the ITAA 1997 any net capital losses from earlier income years can be applied to reduce capital gains in determining the net capital gain for an income year.

However, if during the income year a taxpayer became bankrupt or was released from debts under a law relating to bankruptcy, any net capital losses they made for an earlier income year must be disregarded in working out whether they made a net capital gain for the income year or a later one (subsection 102-5(2) of the ITAA 1997).

Because the taxpayer was released from certain debts under the Bankruptcy Act 1966 (a law relating to bankruptcy) during the 2001-2002 income year, any net capital loss made in an earlier income year is disregarded. Accordingly, the net capital loss carried forward from the 2000-2001 income year cannot be taken into account in the calculation of any net capital gain in the 2001-2002 income year or any later income year.

Date of decision: 13 March 2003

Year of income: Year ended 30 June 2002 Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
subsection 102-5(1)
subsection 102-5(2)

Bankruptcy Act 1966
Part X

Related ATO Interpretative Decisions
ATO ID 2003/259

Keywords
Bankruptcy
Capital gains tax
Capital losses
Carry forward losses
Debt release
Net capital gains
Part X bankruptcy arrangements

Business Line: Losses and Capital Gains Tax Centre of Expertise

Date of publication: 24 April 2003

ISSN: 1445-2782

history

	Date:	Version:
	13 March 2003	Original statement
You are here	26 February 2010	Archived

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