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Edited version of private advice
Authorisation Number: 1051890713633
Date of advice: 10 September 2021
Ruling
Subject: Modified same business continuity test - section 707-125
Question
Are the carried forward tax losses of the Company A Limited tax consolidated group which were generated in income year 1 eligible to be transferred to the Company B multiple entry consolidated group (MEC group) under SD 707-A of the Income Tax Assessment Act 1997 on Company A Limited joining the Company B MEC group?
Answer
No.
This ruling applies for the following period:
1 April 20XX to 31 March 20XX
Relevant facts and circumstances
All the shares in Company A Limited (the head company of a tax consolidated group (TCG)) were acquired by Company B, a foreign resident. This resulted in the Company A Limited TCG joining the Company B multiple entry consolidated (MEC group) (with CSG Limited, the head company, joining as an eligible tier-1 (ET-1) company member).
At time of joining and as at the date of this Notice of Decision, Company A (the head company) had carried forward tax losses totalling $XX incurred in income year 1, an income year prior to the income year Company A Limited joined the Company B MEC group.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 165-210
Income Tax Assessment Act 1997 Subsection 165-210(1)
Income Tax Assessment Act 1997 Paragraph 165-210(2)(a)
Income Tax Assessment Act 1997 Paragraph 165-210(2)(b)
Income Tax Assessment Act 1997 Subsection165-13(2)
Income Tax Assessment Act 1997 Subdivision 707-A
Income Tax Assessment Act 1997 Section 707-20
Income Tax Assessment Act 1997 Subsection 707-20(1)
Income Tax Assessment Act 1997 Subsection 707-20(1A)
Income Tax Assessment Act 1997 Subsection 707-120(2)
Income Tax Assessment Act 1997 Section 707-125
Income Tax Assessment Act 1997 Subsection 707-125(2)
Income Tax Assessment Act 1997 Subparagraph 707-125(2)(a)(i)
Income Tax Assessment Act 1997 Subparagraph 707-125(2)(a)(ii)
Income Tax Assessment Act 1997 Paragraph 707-125(2)(b)
Reasons for decision
The carried forward tax losses of the Company A Limited tax consolidated group which were generated in income year 1 are not eligible to be transferred to the Company B multiple entry consolidated group (MEC group) under SD 707-A of the Income Tax Assessment Act 1997 (ITAA 1997)on Company A Limited joining the Company B MEC group as the modified same business continuity test in section 707-125 of the ITAA 1997.