Edited version of private ruling

Authorisation Number: 1011663523294

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Ruling

Subject: Requirement to lodge company tax returns where rental and/or capital losses are incurred

Question 1

Are you required to lodge company income tax returns for the 2007-08, 2008-09 and 2009-10 income years where you have made rental and/or capital losses that have exceeded $1000 each year.

Answer

Yes. You are required to lodge a company tax return in any given year where you have made a rental and/or capital loss.

This ruling applies for the following period

Year ending 30 June 2008

Year ending 30 June 2009

Year ending 30 June 2010

The scheme commenced on

1 July 2007

Relevant facts

You are requesting a private ruling to determine whether you are required to lodge an income tax return where you have made a loss that exceeds $1000 per annum.

In the 2007-08 income year you made a rental property loss.

In the 2008-09 income year you made a rental property loss.

In the 2009-10 income year you made a rental property loss and a capital loss.

You do not intend to use or carry forward any of the losses.

Relevant legislative provisions

Income Tax Assessment Act, section 161

Reasons for decision

Summary

Under subsection 161(1) of the Income Tax Assessment Act 1936 (ITAA 1936) every person must, where required by the Commissioner by a notice published in the Gazette, give the Commissioner a return for a year of income within the period specified in the notice. Table L of the Legislative Instrument 2010 (2010/TPALS/0007) applicable to the 2009-10 income year, registered for the purposes of subsection 161(1), states that where a full assessment taxpayer, including a company, has derived any income in the given year a company return is required to be lodged. Where you have derived income a company tax return is required to be lodged. Further, as you incurred losses Table A also requires that you lodge a company tax return for those years.

Detailed reasoning

Subsection 161(1) of the ITAA 1936 states:

Every person must, if required by the Commissioner by notice published in the Gazette, give to the Commissioner a return for a year of income within the period specified in the notice.

As required by section 161 of the ITAA 1936, the Lodgment Legislative Instrument, "Lodgment of returns and statement for the year ended 30 June 2010 - Income Tax", (which replaces the Gazette notice) sets out each year the persons, or class of persons, who are required to lodge an income tax return for the financial year.

The 2010 and earlier Legislative Instruments define a full self assessment taxpayer to include a company.

Table F of the Legislative instrument, registered for the purposes of subsection 161(1) of the ITAA 1936, provides that the following class of person is required to lodge a return:

Every person being a full self-assessment taxpayer (excluding trustees of superannuation funds, approved deposit funds and pooled superannuation trusts) not covered by Table N or Table O that during the year of income:

(1)  is an Australian resident, and derived income (including capital gains) from sources in Australia or sources outside Australia; or

(2)   is a non-resident of Australia, and derived income (including capital gains) that is taxable in Australia other than:

· dividend, interest or royalty income subject to withholding payments covered by Subdivision 12-F in Schedule 1 to the Taxation Administration Act 1953, and

· fund payments from managed investment trusts subject to withholding because of the amendments to Subdivision 12-H in Schedule 1 to the Taxation Administration Act 1953 made by Tax Laws Amendment (Election Commitments No 1) Act 2008 (relating to fund payments from managed investment trusts to non-residents).

Consequently in accordance with paragraph 1 of Table F of the Legislative Instrument 2010 you are required to lodge an income tax return as you are an Australian resident and you have derived income from sources in or out of Australia.

There are other factors as outlined in the Legislative Instrument, in addition to the above, which provide circumstances where lodgment is required. Examples as contained in table A of the Legislative Instruments where an income tax return may be required to be lodged even though no income has been derived include where a taxpayer has;

Paragraph 2 - incurred a tax loss or made a net capital loss or is entitled to deduct a tax loss or apply a net capital loss of an earlier year of income, or being a company or trust estate has undeducted tax losses or unapplied net capital losses of any earlier year of income where those losses exceed $1,000 or, being a company, transfers a tax loss or net capital loss to another group company; or

Paragraph 3 - carried on a business.

Table A of the Legislative Instrument 2010 further confirms that you are required to lodge a company tax return as you have met the first condition of paragraph 2 which is that you have "incurred a tax loss or made a net capital loss".

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