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

Guide to Subdivision 165-CD

SECTION 165-115GC   How adjustments are calculated  

165-115GC(1)    
Adjustments are based on the overall loss of the company. This comprises its realised losses and unrealised losses on CGT assets.

165-115GC(2)    
Special rules, directed at saving compliance costs, apply to determine whether unrealised losses have to be counted at an alteration time and, if so, how to work them out.

165-115GC(3)    
The company may not have to calculate its unrealised losses if the alteration time is not also a changeover time for the purposes of Subdivision 165-CC (about change of ownership or control of a company that has an unrealised net loss), and the company has no realised losses.

165-115GC(4)    

The company does not have to count unrealised losses at an alteration time if (together with certain related entities) it has a net asset value of not more than $6,000,000 under the test in section 152-15 (for small business CGT relief).

165-115GC(5)    

In working out its unrealised losses on CGT assets, the company can choose to work out the *market value of each of its assets individually, or of all of its assets together.

165-115GC(6)    

If the company works out the *market value of each of its assets individually, unrealised losses on assets acquired for less than $10,000 do not have to be calculated at any time.

165-115GC(7)    

Amounts (whether realised or unrealised) counted at a previous alteration time are not counted again at a later alteration time. (This does not apply to unrealised losses worked out by reference to the *market value of all the company ' s assets together.)

165-115GC(8)    

However, if unrealised amounts are not counted at a previous alteration time (for example, because of the $10,000 exclusion, or because you satisfy the maximum net asset value test in section 152-15 ) and are not required to be taken into account in adjustments made at that time, they may be counted at a later time as part of a realised loss.

165-115GC(9)    
A formula is provided for making adjustments in straightforward cases if applying the formula gives a reasonable result having regard to the object of the Subdivision. Otherwise, reasonable adjustments must be made having regard to a number of stated factors.

165-115GC(10)    
To help entities to make the adjustments, any entity that, in its own right, has a controlling stake in the company is required to provide a written notice to its associates setting out relevant information. In limited circumstances, the company itself may have to provide a written notice to entities that, to its knowledge, have a significant equity or debt interest in it.