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-CC - Change of ownership or control of company that has an unrealised net loss  

Operative provisions

SECTION 165-115E   What is an unrealised net loss  

165-115E(1)  
The question whether a company has an unrealised net loss at a particular time (the relevant 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 (2)). Method statement


Step 1.

Work out under section 165-115F in respect of each *CGT asset that the company owned at the relevant time any notional capital gain or notional revenue gain or any notional capital loss or notional revenue loss that the company has at that time in respect of the asset.

The sum of the notional capital gains is the company ' s unrealised capital gain at the relevant time.

The sum of the notional capital losses is the company ' s unrealised capital loss at the relevant time.

The sum of the notional revenue gains is the company ' s unrealised revenue gain at the relevant time.

The sum of the notional revenue losses is the company ' s unrealised revenue loss at the relevant time.


Step 2.

Add up the unrealised capital gain and the unrealised revenue gain at the relevant time. The total is the unrealised gross gain at that time.


Step 3.

Add up the unrealised capital loss and the unrealised revenue loss at the relevant time. The total is the unrealised gross loss at that time.


Step 4.

If the unrealised gross loss at the relevant time exceeds the unrealised gross gain at that time, the excess is the company ' s preliminary unrealised net loss at that time.


Step 5.

Add up the company ' s preliminary unrealised net loss and any *capital loss, deduction or share of a deduction disregarded under section 170-270 in relation to an asset referred to in paragraph 165-115A(1A)(b) . The total is the company ' s unrealised net loss at the relevant time.

165-115E(2)  


The global method of working out whether the company has an unrealised net loss at the relevant 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 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 (3) of this section.


Step 3.

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


Step 4.

Add up the company ' s preliminary unrealised net loss and any *capital loss, deduction or share of a deduction disregarded under section 170-270 in relation to an asset referred to in paragraph 165-115A(1A)(b) . The total is the company ' s unrealised net loss at the relevant time.

165-115E(3)  
If:


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


(b) the asset ' s *cost base at the relevant time is less than the amount that 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 has at the relevant time in respect of the asset;

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

165-115E(4)  
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 time occurred; or


(b) such later day as the Commissioner allows.


 

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