Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 175 - Use of a company ' s tax losses or deductions to avoid income tax  

Subdivision 175-CA - Tax benefits from unused net capital losses of earlier income years  

SECTION 175-45   First case: capital gain injected into company because of available net capital loss  

175-45(1)    

The Commissioner may *disallow the *excluded loss if, during the income year, the company made a *capital gain some or all of which (the injected capital gain ) it would not have made if the excluded loss had not been available to be applied in working out the company ' s *net capital gain for the income year (or for some other income year).

175-45(2)    
However, the Commissioner cannot *disallow the *excluded loss if the *continuing shareholders will benefit from the making of the injected capital gain to an extent that the Commissioner thinks fair and reasonable having regard to their respective rights and interests in the company.

Note:

Section 175-100 allows the Commissioner to disallow an excluded loss of an insolvent company.

175-45(3)    
The continuing shareholders are:

(a) all of the persons who had *more than 50% of the voting power in the company during the whole (or the relevant part) of the earlier income year and during the whole of the income year; and

(b) all of the persons who had rights to *more than 50% of the company ' s dividends during the whole (or the relevant part) of the earlier income year and during the whole of the income year; and

(c) all of the persons who had rights to *more than 50% of the company ' s capital distributions during the whole (or the relevant part) of the earlier income year and during the whole of the income year.

To find out who they were, apply whichever tests are applied in order to determine (under section 165-96 ) whether Subdivision 165-A would prevent the company from deducting the loss for the current year if it were a *tax loss of the company for that earlier income year.

Note 1:

See section 165-12 (which is about the company maintaining the same owners).

Note 2:

Division 167 has special rules for working out rights to voting power, dividends and capital distributions in a company whose shares do not all carry the same rights to those matters.