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  

Guide to Subdivision 170-A

SECTION 170-5   Basic principles for transferring tax losses  

170-5(1)  
A company can transfer a tax loss to another company so that the other company can deduct it in the income year of the transfer.

170-5(2)  


Both companies must be members of the same wholly-owned group. There are other eligibility requirements that they must also satisfy.

170-5(2A)  


One of the companies must be an Australian branch of a foreign bank. The other company must be:


(a) the head company of a consolidated group or MEC group; or


(b) not a member of a consolidatable group.

Note:

This Subdivision applies to Australian permanent establishments of foreign entities that are financial entities in the same way as it applies to Australian branches of foreign banks. See section 170-75 .

170-5(3)  
The transferred loss must be " surplus " in the sense that the transferring company cannot use it because there is not enough assessable income to offset it. The other company must have enough assessable income to offset the transferred tax loss.

170-5(4)  
Neither company must be prevented from deducting the loss by Division 165 or 175 .

Note:

Division 165 deals with the income tax consequences of changing ownership or control of a company. Division 175 deals with using a company ' s tax losses to avoid income tax.

170-5(5)  
The tax loss is transferred by an agreement between the 2 companies.

170-5(6)  
The tax loss can be transferred in the same year as it is incurred. In that case different rules apply.


 

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