New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 (90 of 2002)

Schedule 14   Loss integrity rules: global method of valuing assets

Part 2   Income Tax (Transitional Provisions) Act 1997

16   Before Subdivision 165-C

Insert:

Subdivision 165-CC - Change of ownership or control of company that has an unrealised net loss

165-115E Choice to use global method to work out unrealised net loss

A choice under section 165-115E of theIncome Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which theNew Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if:

(a) that time is before that day; and

(b) subsection 165-115E(4) of that Act would otherwise require the choice to be made before the end of those 6 months.

Subdivision 165-CD - Reductions after alterations in ownership or control of loss company

Table of sections

165-115U Choice to use global method to work out adjusted unrealised loss

165-115ZC When certain notices to be given

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

165-115U Choice to use global method to work out adjusted unrealised loss

A choice under section 165-115U of theIncome Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which theNew Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if:

(a) that time is before that day; and

(b) subsection 165-115U(1D) of that Act would otherwise require the choice to be made before the end of those 6 months.

165-115ZC When certain notices to be given

(1) A notice under subsection 165-115ZC(4) or (5) of theIncome Tax Assessment Act 1997 must be given within 6 months after the day on which theNew Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day.

(2) If, because of amendments made by Schedule 14 to theNew Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165-115ZC(4) or (5) of theIncome Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165-115ZC of theIncome Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165-115ZC by giving a further notice.

(3) The further notice:

(a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165-115ZC of theIncome Tax Assessment Act 1997 as affected by the amendments; and

(b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and

(c) must otherwise be given in accordance with that section.

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

(1) This section affects how sections 165-115ZA and 165-115ZB of theIncome 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:

(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 theNew 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 theIncome 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.

(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 theIncome 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 loss referred to in paragraph (1)(a) of this section, except so much of the loss as it is reasonable to conclude is attributable tonone 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.

(3) For the purposes of how sections 165-115ZA and 165-115ZB of theIncome 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.

(4) To avoid doubt:

(a) a notice need not be given under section 165-115ZC of theIncome 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.