Income Tax Assessment Act 1997
This section has effect for the purposes of working out whether a company (the latest transferee ) can * utilise for an income year a loss it made because of a * COT transfer from a company (the latest transferor ).
A transfer of a loss under Subdivision 707-A from a company to a company is a COT transfer of the loss if the transfer occurs because:
(a) the transferor meets the conditions in section 165-12 ; and
(b) the conditions in one or more of paragraphs 165-15(1)(a) , (b) and (c) do not exist in relation to the transferor.
The latest transferee is taken to meet the conditions in section 165-12 for the income year in relation to the loss if and only if the company (the test company ) described in subsection (3) would have met those conditions for the income year had the circumstances described in subsection (4) existed.
The latest transferee and the test company may be the same company.
Section 707-405 may affect the income year for which the test company is treated as having made the loss, if the loss is referable to part of an income year.707-210(3)
The test company is the first company to make the loss. However, if:
(a) the loss was made by the latest transferor because of one or more earlier transfers of the loss under Subdivision 707-A from a company to a company; and
(b) one or more of those earlier transfers was not a * COT transfer;
the test company is the company to which the loss was transferred in the most recent transfer described in paragraph (b).
The circumstances are that:
(a) the test company was not treated by Subdivision 707-A for the income year as not having made the loss; and
(b) if the test company made the loss apart from that Subdivision and transferred the loss to itself under that Subdivision - the test company was not treated by that Subdivision for the income year as having made the loss for the income year in which the transfer occurred; and
(c) nothing happened, after the time the loss was transferred from the test company to the * head company of a * consolidated group, to * membership interests or voting power:
(i) in an entity that was at that time a * subsidiary member of the group; or
that would affect whether the test company would meet the conditions in section 165-12 for the income year; and
(ii) in an entity that was at that time interposed between the test company and the head company;
(d) if the loss has later been transferred under that Subdivision to the head company of another consolidated group - nothing happened, after the time of the later transfer, to membership interests or voting power:
(i) in the later transferor; or
that would affect whether the test company would meet the conditions in section 165-12 for the income year.
(ii) in an entity that was at that time interposed between the later transferor and the head company;
The latest transferee is taken to fail to meet a condition in section 165-12 only at:
(a) the first time the test company would have failed to meet the condition had the circumstances described in subsection (4) existed; or
(b) the test time described in subsection 166-5(6) for the test company, if Division 166 is relevant to working out whether the test company could have * utilised the loss had the circumstances described in subsection (4) existed.
If subsection 166-5(5) affects whether the latest transferee can * utilise the loss for the income year because the latest transferee is a * widely held company or an * eligible Division 166 company, or both, during the year, subsection 166-5(6) operates as if it required the *business continuity test to be applied to the * business the latest transferee carried on just before the time described in subsection (5) of this section.
If the test company made the loss because of a transfer under Subdivision 707-A from another entity, Divisions 165 and 166 operate in relation to the test company for the purposes of subsection (2) as if the test company ' s * loss year started at the time of the transfer.
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