ATO Interpretative Decision

ATO ID 2003/278 (Withdrawn)

Income Tax

Group company loss transfers: net capital loss - gain company incorporated during the application year
FOI status: may be released

This ATO ID is withdrawn as it is a straight application of the law and does not contain an interpretative decision.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

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Can a prior year net capital loss be transferred between two companies in the same wholly-owned group, pursuant to Subdivision 170-B of the Income Tax Assessment Act 1997 (ITAA 1997), if the gain company was incorporated during the income year of the transfer (the 'application year').

Decision

No. The requirements of subsection 170-130(1) of the ITAA 1997 have not been satisfied as the gain company was not in existence during the capital loss year.

Facts

A loss company and a gain company are members of the same wholly-owned group.

The loss company had a surplus net capital loss available for transfer in respect of a particular income year (the 'application year'). The net capital loss had been made in an income year prior to the application year.

The gain company, which was incorporated during the application year, had an excess capital gain in that year.

Reasons for Decision

To transfer net capital losses between two companies within the same wholly-owned group, subsection 170-130(1) of the ITAA 1997 requires both companies to be in existence during at least part of each of the following years: the capital loss year, the application year and any intervening income year.

The phrase 'in existence' is defined in subsection 975-100 of the ITAA 1997 as follows:

A company is in existence if:

a)
it has been incorporated; and

b)
has not been dissolved.

As the gain company was not in existence during the year when the net capital loss was incurred , the prior year net capital loss cannot be transferred to the gain company.

Date of decision: 20 February 2003

Year of income: 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   Sudivision 170-B
   subsection 170-130(1)
   subsection 975-100(1)

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

Keywords
Group company loss transfers
Capital loss
Losses and capital gains tax CoE

Business Line: Losses and CGT Centre of Expertise

Date of publication: 16 May 2003

ISSN: 1445-2782

history

	Date:	Version:
	20 February 2003	Original statement
You are here	15 January 2010	Archived

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