New Business Tax System (Consolidation) Act (No. 1) 2002 (68 of 2002)

Schedule 3   Consequential amendments relating to main consolidation provisions

Part 3   Limiting access to group concessions

Division 2   Loss transfers

Income Tax Assessment Act 1997

39   Transfer for final income year before amendments apply

(1) In this item:

apportioning day of a company means:

(a) if item 37 applies to the company-1 July 2003; or

(b) if item 38 applies to the company-the consolidation day.

Application

(2) This item applies to these transfers under Subdivision 170-A or 170-B of the Income Tax Assessment Act 1997 involving a company:

(a) a transfer by the company of a loss it made for the income year (the final year ) just before the first income year for which the amendments of those Subdivisions by this Schedule apply to the company;

(b) a transfer to the company for the final year of a loss made for that income year or an earlier income year.

However, this item does not apply to a transfer involving companies that would satisfy either subsections 170-30(3) and (4) or 170-130(3) and (4) of that Act (as amended by this Schedule) if those subsections applied for the final year.

Object

(3) The main object of this item is to ensure that the company can either:

(a) transfer a loss it makes for the final year only so far as the loss is attributable to so much of the final year as occurs before its apportioning day; or

(b) utilise a loss transferred to it to reduce income or gains for the final year only so far as the income or gains are attributable to so much of the final year as occurs before its apportioning day.

Apportioning limit on transferring company's loss for final year

(4) Despite section 170-45 of the Income Tax Assessment Act 1997, the amount of a tax loss made for the final year by the company that can be transferred cannot exceed the amount worked out using the formula:

Limit on transferring the tax loss set by subsection 170-45(1) of that Act * (Number of days in the company's final year before its apportioning day / Number of days in the company's final year)

Note: If the company's final year ends just before its apportioning day, this subitem does not reduce the amount of the tax loss the company can transfer.

(5) Despite section 170-145 of the Income Tax Assessment Act 1997, a net capital loss made for the final year by the company:

(a) can be transferred only if the sum of the capital losses made by the company during the final year before its apportioning day exceeds the sum of the capital gains made by the company during the final year before its apportioning day; and

(b) cannot be transferred to an extent greater than that excess.

Note: If the company's final year ends just before its apportioning day, this subitem does not reduce the amount of the net capital loss the company can transfer.

Apportioning limit based on transferee company's income or gains for final year

(6) Despite section 170-45 of the Income Tax Assessment Act 1997, the amount of a tax loss (for the final year or an earlier income year) that can be transferred to the company for the final year cannot exceed the amount worked out using the formula:

Limit on transferring the loss set by whichever of subsections 170-45(2) and (3) of that Act applies * (Number of days in the company's final year before its apportioning day / Number of days in the company's final year)

Note: If the company's final year ends just before its apportioning day, this subitem does not reduce the amount of the tax loss that can be transferred to the company.

(7) Despite section 170-145 of the Income Tax Assessment Act 1997, a net capital loss (for the final year or an earlier income year) can be transferred to the company for the final year:

(a) only if the company would have had a net capital gain for the final year apart from that section had the final year ended on the day before the company's apportioning day; and

(b) only to the extent to which it could have been transferred consistently with subsection 170-145(6) of that Act if the result of step 1 of the method statement had been the amount of the company's net capital gain worked out on the basis described in paragraph (a) of this subitem.

Note: If the company's final year ends just before its apportioning day, this subitem does not reduce the amount of the net capital loss that can be transferred to the company.

Transfer not prevented by transferor joining consolidated group

(8) Subsections 170-45(1) and 170-145(1) of the Income Tax Assessment Act 1997 apply in relation to a transfer from a company (whether or not it is the company mentioned in subitem (4) or (5)) that becomes a member of a consolidated group or MEC group as if the fact that the company becomes such a member does not affect its ability to carry forward losses for the final year or an earlier income year.

Application to non membership periods less than a year

(9) If, under section 701-30 of the Income Tax Assessment Act 1997, the company has a non membership period that ends just before the company first becomes a subsidiary member of a consolidated group or MEC group, Subdivisions 170 A and 170 B of that Act and subitems (3) to (8) (inclusive) apply in relation to the period as if it were the final year.

(10) To avoid doubt, section 701-30 of the Income Tax Assessment Act 1997 does not prevent a company from transferring under Subdivision 170-A or 170-B of that Act (applying as described in subitem (9)) a non membership period loss described in that section for the non membership period mentioned in that subitem.