Tax Laws Amendment (2010 Measures No. 1) Act 2010 (56 of 2010)

Schedule 5   Consolidation

Part 16   Loss multiplication rules for widely held companies

Income Tax Assessment Act 1997

141   After subsection 165-115X(2)

Insert:

(2A) A *widely held company that, apart from this subsection, would have a relevant equity interest in a *loss company at a particular time does not have such an interest at that time.

(2B) Subsection (2A) does not apply if:

(a) an entity has a controlling stake in the loss company (see section 165-115Z); and

(b) that entity has a direct or indirect interest in, or is owed a debt by, the *widely held company, being an interest or debt in respect of which:

(i) the entity could, if a *CGT event happened in respect of the interest or debt, make a *capital loss (other than a capital loss that would be disregarded) that reflects any part of the loss company's overall loss; or

(ii) the entity has deducted or can deduct, or could deduct at a later time, an amount in respect of the cost of the *acquisition, or a net loss on the *disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company's overall loss.

(2C) Subsection (2A) does not apply in respect of a particular time if an entity that had a direct or indirect interest in, or was owed a debt by, the *widely held company at an earlier time, and had a controlling stake in the loss company (see section 165-115Z) at the earlier time:

(a) made a capital loss (other than a capital loss that was disregarded) because a *CGT event happened in respect of the interest or debt, where the capital loss reflected any part of the *loss company's overall loss; or

(b) has deducted or could have deducted at an earlier time, or could deduct at a later time, an amount in respect of the cost of the *acquisition, or a net loss on the *disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company's overall loss.