INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 4 - Treatment of gains and losses  

SECTION 160ZP   TRANSFER OF NET CAPITAL LOSS WITHIN COMPANY GROUP  

160ZP(1A)   [No transfer in 1998/99 income year onwards]  

An amount of a net capital loss cannot be transferred under this section in the 1998-99 year of income or a later year of income.

Note:

To work out whether a company can transfer a net capital loss to another company in the 1998-99 year of income or a later year of income: see Subdivision 170-B of the Income Tax Assessment Act 1997 .

160ZP(1)   [Group company]  

For the purposes of this section, a company shall be taken to be a group company in relation to another company in relation to a year of income if -


(a) one of the companies was a subsidiary of the other company; or


(b) each of the companies was a subsidiary of the same company,

during the whole of that year of income or, if either or both of those companies was not or were not in existence during part of that year of income, during that part of that year of income during which both companies were in existence.

160ZP(2)   [Subsidiary company]  

For the purposes of this section, a company (in this subsection referred to as the ``subsidiary company'' ) shall be taken to be the subsidiary of another company (in this subsection referred to as the ``holding company'' ) during a period (in this subsection referred to as the ``relevant period'' ), being the whole or a part of a year of income, if -


(a) at all times during the relevant period, all the shares in the subsidiary company were beneficially owned by -


(i) the holding company;

(ii) a company that is, or two or more companies each of which is, a subsidiary of the holding company; or

(iii) the holding company and a company that is, or two or more companies each of which is, a subsidiary of the holding company; and


(b) no person was in a position during any part of the relevant period, or would become in a position after the relevant period, to affect rights of the holding company or of a subsidiary of the holding company in relation to the subsidiary company.

160ZP(3)   [Sub-subsidiaries]  

For the purposes of this section, where a company is a subsidiary of another company (including a company that is such a subsidiary by virtue of another application or other applications of this subsection), every company that is a subsidiary of the first-mentioned company shall be taken to be a subsidiary of that other company.

160ZP(4)   [Position to affect rights]  

For the purposes of subsection (2), a person shall be taken to be in a position during a year of income, or a part of a year of income, to affect any rights of a company in relation to another company if, during the year of income, or that part of the year of income, that person has a right, power or option (whether by virtue of any provision in the constituent document of either of those companies, by virtue of any agreement or otherwise) to acquire those rights or do an act or thing that would prevent the first-mentioned company from exercising those rights for its own benefit or receiving any benefits accruing by reason of those rights.

160ZP(5)   [``agreement'']  

In subsection (4), ``agreement'' means an agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

160ZP(6)   [Company in existence]  

Subject to subsections (6A) and (6B), for the purposes of this section, a company shall be taken to be in existence if it has been incorporated and has not been dissolved.

160ZP(6A)   [Acquisition of shelf company]  

For the purposes of subsection (1), where:


(a) at a time (in this subsection called the ``acquisition time'' ) in the year of income commencing on 1 July 1985 or in a subsequent year of income, one or more companies acquired all the shares in another company (in this subsection called the ``shelf company'' ) from the shareholders in the shelf company; and


(b) the shelf company was dormant, within the meaning of Part VI of the Companies Act 1981 , throughout the period (in this subsection called the ``dormant period'' ) commencing on the day on which the shelf company was incorporated and ending at the acquisition time;

the shelf company shall be taken not to have been in existence during the dormant period.

160ZP(6B)   [Issue of shares by shelf company]  

For the purposes of subsection (1), where:


(a) at a time (in this subsection called the ``issue time'' ) in the year of income commencing on 1 July 1985 or in a subsequent year of income, a company (in this subsection called the ``shelf company'' ) issued shares (in this subsection called the ``newly issued shares'' ) to another company or companies;


(b) immediately before the issue time, a person or persons held other shares in the shelf company;


(c) immediately after the issue time, the shelf company redeemed all the shares in the shelf company other than the newly issued shares; and


(d) the shelf company was dormant, within the meaning of Part VI of the Companies Act 1981, throughout the period (in this subsection called the ``dormant period'' ) commencing on the day on which the shelf company was incorporated and ending immediately before the issue time;

the shelf company shall be taken not to have been in existence during the dormant period.

160ZP(7)   [Agreement re treatment of capital loss]  

Subject to this section, subsection (7AAA) applies if:


(a) a company that is a resident other than a prescribed dual resident (the loss company ) is taken to have incurred a net capital loss for a year of income (the loss year );


(b) a net capital gain accrued, or would but for the operation of this section have accrued, to a company that is a resident other than a prescribed dual resident (in this section referred to as the ``gain company'' ) in respect of a year of income (in this section referred to as the ``gain year'' ) that is either the loss year or a later year of income;


(baa) if the gain year is after the loss year - the net capital loss has been applied in determining whether a net capital gain accrued to the loss company in respect of the gain year or would have been so applied if sufficient capital gains had accrued to the loss company during the gain year;


(ba) the loss company is not a dual resident investment company in relation to the loss year nor in relation to the gain year;


(c) the loss company and the gain company agree that the whole or a part of the net capital loss (the transferred amount ) will be transferred from the loss company to the gain company;


(d) in a case where the loss year is the same year of income as the gain year - the loss company is a group company in relation to the gain company in relation to the loss year; and


(e) in a case where the gain year is a year of income after the loss year - the loss company is a group company in relation to the gain company in relation to the loss year and the gain year and in relation to any year of income commencing after the end of the loss year and ending before the commencement of the gain year.

160ZP(7AAA)   [Transferred amount]  

If this subsection applies:


(a) the net capital loss of the loss company for the loss year is reduced by the transferred amount; and


(b) for the purposes of the application of this Part in determining whether a net capital gain accrued to the gain company in respect of the gain year, the transferred amount is taken to be:


(i) if the gain year is the same year of income as the loss year, the gain company is not required to calculate a net capital gain or net capital loss under Division 3A in respect of the gain year and the gain company is not required to calculate a net capital loss under Division 3D in respect of the gain year - a capital loss incurred by the gain company during the gain year; or

(ii) if the gain year is a year of income after the loss year - a net capital loss for the gain company for the loss year.

160ZP(7AAB)   [When determining company requirement]  

In determining for the purposes of subparagraph (7AAA)(b)(i) whether a company is required to calculate a net capital gain or a net capital loss under Division 3A in respect of the gain year, disregard subsection 160ZNF(3) .

160ZP(7AAC)   [Does net capital loss need to be calculated?]  

In determining for the purposes of subparagraph (7AAA)(b)(i) whether Division 3D would require the gain company to calculate a net capital loss in respect of the gain year, assume the gain company incurred a capital loss equal to the transferred amount during the gain year.

160ZP(7AA)   [Form and time of agreement]  

An agreement made under paragraph (7)(c) must be:


(a) in writing and signed by the public officer of each of the gain company and the loss company; and


(b) made on or before the date of lodgment of the return of income of the gain company for the gain year or within such further time as the Commissioner allows.

160ZP(7A)   [Limitation of amount of capital loss]  

Subject to subsection (7B), where an amount is specified in an agreement made by the loss company and the gain company under paragraph (7)(c) transferring the whole or a part of a capital loss to the gain company:


(a) if, at the end of the gain year:


(i) no company that is a group company in relation to the loss company in relation to the gain year held shares in the loss company that were acquired by that group company after 19 September 1985; and

(ii) the loss company was not, in respect of any loan made to the loss company, indebted to a company that is a group company in relation to the loss company in relation to the gain year in respect of an indebtedness that commenced to be owed after 19 September 1985;
this section has effect as if the agreement had not been made; or


(b) if paragraph (a) does not apply and the amount specified in the agreement exceeds the sum of:


(i) if any company or companies (in this subparagraph called the ``parent company'' or ``parent companies'' ) which, or each of which, is a group company in relation to the loss company in relation to the gain year held, at the end of the gain year, shares in the loss company that were acquired by the parent company or parent companies after 19 September 1985 - the amount that, if the shares were disposed of at the end of the gain year, would have been the cost base to the parent company, or the sum of the cost bases to the parent companies, as the case may be, of the shares; and

(ii) if, at the end of the gain year, the loss company was, in respect of a loan or loans made to the loss company, indebted to a company or companies (in this subparagraph called the ``creditor company'' or ``creditor companies'' ) which, or each of which, is a group company in relation to the loss company in relation to the gain year, being an indebtedness that commenced to be owed to the creditor company or creditor companies after 19 September 1985 - the amount that, if the debt or debts were disposed of at the end of the gain year, would have been the cost base to the creditor company or the sum of the cost bases to the creditor companies, as the case may be, of the debt or debts;
the amount specified in the agreement is taken to be reduced by the excess.

160ZP(7B)   [Gain company subsidiary of loss company]  

Subsection (7A) does not apply in relation to an agreement made by the loss company and the gain company under paragraph (7)(c) if the gain company is a subsidiary of the loss company.

160ZP(8)   Maximum that can be transferred.  

The maximum amount transferred cannot exceed the amount obtained by deducting:


(a) any amount that has been, or will be, transferred under an agreement previously made under paragraph (7)(c) by any company transferring the whole or a part of a net capital loss to the gain company in the gain year;

from:


(b) the net capital gain that accrued, or would but for the operation of this section have accrued, to the gain company in respect of the gain year.

160ZP(8A)   [Year after loss year]  

If the gain year is a year of income after the loss year, the maximum amount transferred can also not exceed the amount mentioned in subsection 160ZC(3B) as the unapplied amount that can be carried forward to be applied in the year of income after the gain year.

160ZP(8B)   Effect of specifying more than the maximum.  

If the amount specified in an agreement exceeds the maximum amount that the loss company can transfer to the gain company in the gain year, only that maximum amount is taken to have been transferred.

160ZP(8C)   [Assessment may have been amended]  

One reason why an agreement might specify more than can be transferred is that an assessment has been amended since the agreement.

160ZP(8D)   Order in which losses are transferred.  

Where 2 or more net capital losses of the loss company are able to be transferred under this section, those net capital losses may be transferred only in the order in which they were incurred.

160ZP(8E)   [Loss not incurred by loss company]  

The Commissioner may, at any time, amend an assessment of the gain company to give effect to subsection (8B) where the net capital loss or part of the net capital loss was not taken to have been incurred by the loss company. The Commissioner may do so despite section 170 (amendment of assessments).

160ZP(9)   [Loss not to be specified in agreement]  

If the loss company is required to calculate a net capital loss in respect of the loss year under Division 3A or Division 3D, no part of a net capital loss incurred by that company in respect of that year is capable of being specified in an agreement under paragraph (7)(c).

160ZP(9A)  

160ZP(9B)   [Capital losses incurred by PDF]  

If the loss company was a PDF throughout the last day of the loss year, no part of the net capital loss incurred by that company in respect of that year can be specified in a notice under paragraph (7)(c).

160ZP(9C)   [Capital losses incurred before company became PDF]  

However, subsection (9B) does not apply to so much of the net capital loss as does not exceed the amount (if any) by which the total of:


(a) if the loss company is taken to have incurred a net capital loss in respect of the last year of income before the year of income at the start of which, or during which, it became a PDF - that net capital loss; and


(b) if the loss company incurred a capital loss or capital losses after that last year of income and before it became a PDF - that capital loss or those capital losses;

exceeds:


(c) if a capital gain or capital gains accrued to the loss company after that last year of income and before the end of the loss year - that capital gain or the total of those capital gains; or


(d) otherwise - a nil amount.

160ZP(10)   [Limitation on further agreements]  

Where the loss company makes an agreement in accordance with paragraph (7)(c) in relation to a part or parts of a net capital loss incurred by the loss company, that company must not make a further agreement in accordance with that paragraph in relation to that net capital loss that purports to specify in relation to a company another part of that net capital loss that exceeds the amount obtained by deducting from the amount of that net capital loss the amount of that part of that net capital loss, or the sum of the amounts of those parts of that net capital loss, specified in the first-mentioned agreement.

160ZP(11)   [Where loss company is shareholder receiving consideration for loss]  

If the loss company is a shareholder in the gain company and receives any consideration from the gain company for the whole or a part of a net capital loss incurred by the loss company being treated under subsection (7AAA) as a capital loss or a net capital loss incurred by the gain company:


(a) a capital gain does not accrue to the loss company because of the receipt of the consideration; and


(b) the consideration is not taken to be income derived by the loss company.

160ZP(12)   [Where gain company gives consideration]  

If the gain company gives any consideration to the loss company for the whole or a part of a net capital loss incurred by the loss company being treated under subsection (7AAA) as a capital loss or a net capital loss incurred by the gain company:


(a) the gain company does not incur a capital loss because of the giving of the consideration; and


(b) the consideration is not an allowable deduction to the gain company.

160ZP(13)   [Reduction of cost base, etc]  

Where:


(a) an amount has been specified by the loss company in an agreement under paragraph (7)(c); and


(b) either:


(i) a company (in this subsection called a ``parent company'' ) that is a group company in relation to the loss company in relation to the gain year holds shares in another company that is such a group company, being shares that were acquired by the parent company after 19 September 1985; or

(ii) a company (in this subsection called a ``creditor company'' ) that is a group company in relation to the loss company in relation to the gain year is owed a debt by another company that is such a group company in respect of a loan made to that other company, being a debt that commenced to be owed to the creditor company after 19 September 1985; and


(c) either:


(i) the other company referred to in subparagraph (b)(i) or (ii), as the case may be, is the loss company; or

(ii) the money paid to acquire the shares or the money lent, as the case may be, has indirectly, through one or more interposed companies, trusts or partnerships, been applied in the acquisition of shares in the loss company by a company that is a group company in relation to the loss company in relation to the gain year or in the making of a loan to the loss company by a company that is such a group company;

the cost base, the indexed cost base or the reduced cost base, as the case may be, to the parent company of the shares or to the creditor company of the debt is reduced by such amount as is appropriate having regard to any consideration referred to in subsection (12) and to the direct or indirect interest of the parent company or creditor company in the loss company.

160ZP(14)   [Increase in cost base]  

Where:


(a) an amount has been specified by the loss company in an agreement under paragraph (7)(c); and


(b) either:


(i) a company (the ``parent company'' ) that is a group company in relation to the gain company in relation to the gain year holds shares in another company that is such a group company, being shares that were acquired by the parent company after 19 September 1985; or

(ii) a company (the ``creditor company'' ) that is a group company in relation to the gain company in relation to the gain year is owed a debt by another company that is such a group company in respect of a loan made to that other company, being a debt that commenced to be owed to the creditor company after 19 September 1985; and


(c) either:


(i) the other company referred to in subparagraph (b)(i) or (ii), as the case may be, is the gain company; or

(ii) the money paid to acquire the shares or the money lent, as the case may be, has indirectly, through one or more interposed companies, trusts or partnerships, been applied in the acquisition of shares in the gain company by a company that is a group company in relation to the gain company in relation to the gain year or in the making of a loan to the gain company by a company that is such a group company;

the cost base, the indexed cost base or the reduced cost base, as the case may be, to the parent company of the shares or to the creditor company of the debt is increased by such amount as is appropriate having regard to any consideration referred to in subsection (12) and to the direct or indirect interest of the parent company or creditor company in the gain company.

160ZP(15)   [Amount of increase in cost base]  

The amount of the increase under subsection (14) in the cost base, the indexed cost base or the reduced cost base, as the case may be, to the parent company of the shares, or to the creditor company of the debt, is not to exceed the increase in the market value of the shares or the debt that results from the capital loss, or the net capital loss, being taken to have been incurred by the gain company.

160ZP(16)   [Transfer of net capital losses]  

The provisions of Subdivision 170-C of the Income Tax Assessment Act 1997 (so far as they relate to the transfer of net capital losses) are to be disregarded in applying the provisions of this section where the relevant agreement referred to in paragraph (7)(c) was made before 22 February 1999.


 

Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited

CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or omissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.

The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.