INCOME TAX (TRANSITIONAL PROVISIONS) 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-CD - Reductions after alterations in ownership or control of loss company  

SECTION 165-115ZD   Adjustment (or further adjustment) for interest realised at a loss after global method has been used  

165-115ZD(1)  


This section affects how sections 165-115ZA and 165-115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity ) in, or a debt owed by, a company if apart from this section, a loss (the realised loss ):


(a) would be realised for income tax purposes by a realisation event that happens to the equity or debt; or


(b) would be so realised but for Subdivision 170-D of that Act (which defers realisation of capital losses and deductions);

and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time:


(c) that happened for the company, before the realisation event; and


(d) immediately before which the equity or debt was, or was part of:


(i) if the company was a loss company at that alteration time - a relevant equity interest, or a relevant debt interest, that an entity had in the company; or

(ii) otherwise - what would have been such an interest if the company had been a loss company at that alteration time;

and these conditions are satisfied:


(e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and


(f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165-115ZD of the Income Tax Assessment Act 1997 ; and


(g) the choice is made on or before the latest of these:


(i) the last day of the period of 6 months after the day referred to in paragraph (c) of this subsection;

(ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred;

(iii) such later day as the Commissioner allows.

If the entity makes that choice, this section applies accordingly instead of that section.

165-115ZD(2)  
In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165-115ZA and 165-115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if:


(a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these:


(i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset;

(ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and


(b) the company were therefore a loss company at that time; and


(c) that adjusted unrealised loss were the company ' s overall loss at that time.

165-115ZD(3)  
For the purposes of how sections 165-115ZA and 165-115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165-115ZB of that Act is to be worked out and applied in accordance with subsection 165-115ZB(6) (the non-formula method) of that Act.

165-115ZD(4)  
To avoid doubt:


(a) a notice need not be given under section 165-115ZC of the Income Tax Assessment Act 1997 because of this section; and


(b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section.

165-115ZD(5)  


If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of:


(a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and


(b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset.


 

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