Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 170 - Treatment of certain company groups for income tax purposes  

Subdivision 170-A - Transfer of tax losses within certain wholly-owned groups of companies  

Conditions for transfer

SECTION 170-45   Maximum amount that can be transferred   Loss company can only transfer what it cannot use itself

170-45(1)  


The amount transferred cannot exceed what would be the amount of the * loss company ' s * unutilised * tax loss at the end of the * deduction year if the loss company utilised the tax loss to the greatest extent possible. Transferred loss must not exceed what the income company can use

170-45(2)  
The amount transferred also cannot exceed the amount worked out as follows: Method statement


Step 1.

Add together the *income company ' s assessable income and *net exempt income (if any) for the *deduction year.


Step 2.

Subtract the *income company ' s deductions for the *deduction year, except deductions for amounts of *tax losses transferred to the income company (by the *loss company or any other company).


Step 3.

Subtract the *income company ' s deductions for the *deduction year for amounts of *tax losses transferred to the income company (by the *loss company or any other company) by agreements made before the agreement by which the first amount is transferred.

Example:

In the deduction year:

  • · the income company has assessable income of $60,000, net exempt income of $10,000 and deductions of $25,000 (apart from the transferred loss); and
  • · another company, being a member of the same wholly-owned group as the income company, transferred a tax loss of $15,000 to the income company; and
  • · the loss company incurred a tax loss of $50,000.
  • Of the $50,000 loss, the loss company can transfer no more than $30,000 ($60,000 + $10,000 - $25,000 - $15,000) to the income company.

    170-45(3)  
    Subsection (2) does not apply if the *tax loss is a *film loss. In that case, the amount transferred also cannot exceed the amount worked out as follows: Method statement


    Step 1.

    Add together the *income company ' s *net assessable film income and *net exempt film income (if any) for the *deduction year.


    Step 2.

    Subtract the *income company ' s deductions for the *deduction year for amounts of *film losses transferred to the income company (by the *loss company or any other company) by agreements made before the agreement by which the first amount is transferred.

    170-45(4)  


    Subsections (2) and (3) do not apply if the transfer occurs because either or both of the conditions in subsections 170-42(2) and (4) are met. In that case, the amount transferred also cannot exceed the amount worked out as follows: Method statement

    Step 1.

    Identify each *bundle of losses that, on the assumption in subsection 170-42(2) or (4) (as appropriate), would have included the *tax loss or *film loss (as appropriate).

    Note 1:

    There will be 2 or more bundles of losses identified if both of the conditions in subsections 170-42(2) and (4) are met.

    Note 2:

    There will be more than 1 bundle of losses identified on the basis of the assumption in paragraph 170-42(4) if the conditions in subsections 170-30(1) and (2) are met in relation to the loss company and the income company because of multiple applications of section 170-33 each involving a different first link company.


    Step 2.

    For each *bundle identified, work out how much of the *tax loss or *film loss (as appropriate) the *income company would have been able to deduct in the *deduction year assuming that:

  • (a) the loss could have been deducted in that year only after the deduction in that year of any other losses of that *sort that would have been included in the bundle, other than losses (the transferable losses ) that could be transferred from the *loss company to the income company for that year; and
  • (b) if the bundle would have included 2 or more transferable losses of that sort - those losses could have been deducted only in the order in which the loss company incurred them.
  • Note 1:

    If the assumption in subsection 170-42(2) is relevant to the bundle, it would have included losses incurred by the income company and transferred (or taken to be transferred) to the company (from itself) under Subdivision 707-A .

    Note 2:

    If the assumption in paragraph 170-42(4) is relevant to the bundle, it would have included losses actually incurred by the first link company and transferred (by one or more transfers under Subdivision 707-A ) to the income company.


    Step 3.

    Total every result of step 2 for the *tax loss or *film loss (as appropriate).


     

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