Income Tax Assessment 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-CC - Change of ownership or control of company that has an unrealised net loss  

Operative provisions

SECTION 165-115A   Application of Subdivision  

Application

165-115A(1)    
This Subdivision applies to a company if:

(a) a changeover time has occurred or occurs in relation to the company after the commencement time; and

(b) at the changeover time the company had an unrealised net loss (see section 165-115E ); and

(c) either of the following applies:

(i) the company makes a *capital loss, or apart from this Subdivision would be entitled to a deduction, in respect of a *CGT event that happens to a *CGT asset referred to in subsection (1A);

(ii) the company makes a *trading stock loss in respect of a CGT asset referred to in subsection (1A) that is an item of *trading stock; and

(d) the company would not, at the changeover time, satisfy the maximum net asset value test under section 152-15 .

CGT assets in respect of which Subdivision applies

165-115A(1A)    

The *CGT assets for the purposes of paragraph (1)(c) are:

(a) any CGT asset that the company owned at the changeover time; and

(b) any CGT asset that the company did not own at the changeover time but had owned at a previous time, where:

(i) a deferral event referred to in subsection 170-255(1) happened before the changeover time; and

(ii) the deferral event involved the company as the originating company referred to in that subsection; and

(iii) the deferral event would have resulted in the company making a *capital loss, or becoming entitled to a deduction, in respect of the CGT asset except for section 170-270 ; and

(iv) the company is not taken to have made a capital loss at or before the changeover time, or to have become entitled to a deduction at that time, under section 170-275 in respect of the asset.

Company may choose to disregard CGT assets acquired for less than $10,000

165-115A(1B)    

A company may choose, for the purposes of the application of this Subdivision to it in respect of a particular changeover time, that every *CGT asset that has been acquired by it for less than $10,000 is to be disregarded.

However, the choice does not affect the application of the *global method of working out whether the company has an unrealised net loss (see subsection 165-115E(2) ).

Time for making choice

165-115A(1C)    

A choice under subsection (1B) must be made on or before:

(a) the day on which the company lodges its *income tax return for the income year in which the relevant changeover time occurred; or

(b) such later day as the Commissioner allows.

Trading stock loss

165-115A(1D)    

A company is taken to have made a trading stock loss in respect of an asset that is an item of *trading stock if, and only if:

(a) one of the following applies:

(i) the company *disposes of the item;

(ii) the item stops being trading stock (within the meaning of section 70-80 );

(iii) the item is revalued under Division 70 ; and

(b) if subparagraph (a)(i) or (ii) applies - the item ' s *market value at the time when it is disposed of or stops being trading stock is less than:

(i) in respect of an item that has been valued under Division 70 - its latest value under the Division; or

(ii) otherwise - its cost at that time; and

(c) if subparagraph (a)(iii) applies - the item ' s value under the revaluation is less than:

(i) in respect of an item that has previously been valued under Division 70 - its latest value under that Division before the revaluation; or

(ii) otherwise - its cost at the time of the revaluation.

The difference worked out under paragraph (b) or (c), as the case may be, constitutes the amount of the *trading stock loss.

Commencement time

165-115A(2)    
For the purposes of this Subdivision, the commencement time of a company is:

(a) if the company was in existence at 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999 - that time; or

(b) if the company came into existence after that time - the time when it came into existence.

Reference time

165-115A(2A)    

For the purposes of the application of this Subdivision to a company in relation to a particular time (the test time ), the reference time is:

(a) if no changeover time occurred in respect of the company before the test time - the commencement time; or

(b) otherwise - the time immediately after the last changeover time that occurred in respect of the company before the test time.

Asset owned at more than one changeover time

165-115A(3)    
If:

(a) 2 or more changeover times have occurred or occur in relation to a company; and

(b) the company owned a particular asset at more than one of those changeover times;

this Subdivision applies to the company in respect of that asset only in relation to the later or latest of those changeover times.

Note:

For changeover time see sections 165-115C and 165-115D .