Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION

PART 2-5 - RULES ABOUT DEDUCTIBILITY OF PARTICULAR KINDS OF AMOUNTS

Division 36 - Tax losses of earlier income years

Subdivision 36-A - Deductions for tax losses of earlier income years

SECTION 36-25

36-25 Special rules about tax losses

Tax losses of individuals

Item	For the special rules about this situation …	See:
1.	You go bankrupt, or you are released from debts under a bankruptcy law: your right to deduct tax losses of an earlier income year may be affected.	Subdivision 36-B

Tax losses of companies

Item	For the special rules about this situation …	See:
1.	A company has had a change of ownership or control during the income year, and has not satisfied the business continuity test: it works out its taxable income and its tax loss in a special way.	Subdivision 165-B

2.	A company wants to deduct a tax loss. It cannot do so unless:	Subdivision 165-A
	•	the same people owned the company during the loss year, the income year and any intervening year; and
	•	no person controlled the company ' s voting power at any time during the income year who did not also control it during the whole of the loss year and any intervening year;
	or the company has satisfied the business continuity test.

3.	One or more of these things happen:	Division 175
	•	income is injected into a company;
	•	a tax benefit is obtained from available losses or deductions;
	•	a deduction is injected into a company;
	•	a tax benefit is obtained because of available income.
	The Commissioner can disallow tax losses or current year deductions.

4.	A company can transfer a surplus amount of its tax loss to another company so that the other company can deduct the amount in the income year of the transfer. (Both companies must be members of the same wholly-owned group.)	Subdivision 170-A

	See also: Tax losses of pooled development funds (PDFs) below

5.	A life insurance company	Subdivision 320-D

6.	A company is a designated infrastructure project entity.	Subdivision 415-B

Tax losses of corporate tax entities

Item	For the special rules about this situation …	See:
1.	A corporate tax entity that has an amount of excess franking offsets for an income year: it works out its tax loss in a special way.	Subdivision 36-C

	See also Division 160 (loss carry back tax offset for 2020-21, 2021-22 or 2022-23 for businesses with turnover under $5 billion)

Tax losses of entities generally

Item	For the special rules about this situation …	See:
1.	(Repealed by No 143 of 2007 )

2.	(Repealed by No 143 of 2007 )

3.	You have deductions in relation to deriving income under section 26AG of the Income Tax Assessment Act 1936 from the proceeds of a film: your tax loss may have a film component, which is deductible from your film income only.	Former Subdivision 375-G

Tax losses of pooled development funds (PDFs)

Item	For the special rules about this situation …	See:
1.	A company is a pooled development fund (PDF) at the end of an income year for which it has a tax loss: it can only: (a) deduct the loss while it is a PDF; or (b) carry back the loss to an income year in which it was a PDF.	Sections 195-5 and 195-37

2.	A company becomes a PDF during an income year: special rules affect how it works out a tax loss and how the loss is utilised.	Section 195-15

Tax losses of VCLPs, ESVCLPs, AFOFs and VCMPs

Item	For the special rules about this situation …	See:
1.	A limited partnership that has a tax loss becomes a VCLP, an ESVCLP, an AFOF or a VCMP: it cannot: (a) deduct the loss while it is a VCLP, an ESVCLP, an AFOF or a VCMP; or (b) carry back the loss to an income year in which it was not a VCLP, an ESVCLP, an AFOF or a VCMP.	Subdivision 195-B

Tax losses of entities that become foreign hybrids

Item	For the special rules about this situation …	See:
1.	An entity that has a tax loss becomes a foreign hybrid: it cannot deduct the loss while it is a foreign hybrid.	Section 830-115

Tax losses of trusts

Item	For the special rules about this subsection …	See:
1.	A trust has had a change of ownership or control or there has been an abnormal trading in its units:	Divisions 266 , 267 and 268 in Schedule 2F to the Income Tax Assessment Act 1936
	•	if this happens in the income year, it works out its net income and tax loss in a special way; or
	•	if this happens at any time from the start of a loss year until the end of the income year, it cannot deduct a tax loss from the loss year.
	This will not be the case if the trust is an excepted trust. However, if it became one by making a family trust election, a special tax may be payable on certain distributions and other amounts.

2.	A trust is involved in a scheme to take advantage of deductions. The trust may be prevented from making full use of them.	Division 270 in Schedule 2F to the Income Tax Assessment Act 1936

3.	A trust is a designated infrastructure project entity.	Subdivision 415-B

Tax losses of greenfields minerals explorers

Item	For the special rules about this situation …	See:
1.	A greenfields minerals explorer creates exploration credits.	Section 418-95

View history note

History

S 36-25 amended by No 8 of 2022, s 3 and Sch 6 item 3, by substituting " , 2021-22 or 2022-23 " for " or 2021-22 " in table dealing with tax losses of corporate tax entities, effective 1 April 2022.

S 36-25 amended by No 92 of 2020, s 3 and Sch 2 items 19 - 21, by inserting " See also Division 160 (loss carry back tax offset for 2020-21 or 2021-22 for businesses with turnover under $5 billion) " in table dealing with tax losses of corporate tax entities and substituting table item 1 in table dealing with tax losses of pooled development funds (PDFs) and table item 1 in table dealing with tax losses of VCLPs, ESVCLPs, AFOFs and VCMPs, effective 1 January 2021. The substituted table items formerly read:

Tax losses of pooled development funds (PDFs)

1. A company is a pooled development fund (PDF) at the end of an income year for which it has a tax loss: it can only deduct the loss while it is a PDF. Sections 195-5

Tax losses of VCLPs, ESVCLPs, AFOFs and VCMPs

1. A limited partnership that has a tax loss becomes a VCLP, an ESVCLP, an AFOF or a VCMP: it cannot deduct the loss while it is a VCLP, an ESVCLP, an AFOF or a VCMP. Subdivision 195-B

S 36-25 amended by No 7 of 2019, s 3 and Sch 1 item 35, by substituting " business continuity test " for " same business test " in table relating to tax losses of companies, table items 1 and 2, effective 1 April 2019 and applicable in relation to income years starting on or after 1 July 2015.

S 36-25 amended by No 21 of 2015, s 3 and Sch 6 item 17, by inserting table dealing with " Tax losses of greenfields minerals explorers " , applicable in relation to the 2015-16, 2016-17 and 2017-18 income years, but not in relation to any later income years.

S 36-25 amended by No 96 of 2014, s 3 and Sch 2 items 17 - 19, by omitting " See also Division 160 (loss carry back tax offset) " from table dealing with tax losses of corporate tax entities, substituting table item 1 in table dealing with tax losses of pooled development funds (PDFs) and table item 1 in table dealing with tax losses of VCLPs, ESVCLPs, AFOFs and VCMPs, effective 30 September 2014 and applicable to assessments for the income year before the income year in which this Schedule commences, for the income year in which this Schedule commences and for later income years. For transitional and saving provision see note under Div 160 heading. The substituted table items formerly read:

Tax losses of pooled development funds (PDFs)

1. A company is a pooled development fund (PDF) at the end of an income year for which it has a tax loss: it can only:
(a) deduct the loss while it is a PDF; or
(b) carry back the loss to an income year in which it was a PDF. Sections 195-5 and 195-37

Tax losses of VCLPs, ESVCLPs, AFOFs and VCMPs

1. A limited partnership that has a tax loss becomes a VCLP, an ESVCLP, an AFOF or a VCMP: it cannot:
(a) deduct the loss while it is a VCLP, an ESVCLP, an AFOF or a VCMP; or
(b) carry back the loss to an income year in which it was not a VCLP, an ESVCLP, an AFOF or a VCMP. Subdivision 195-B

S 36-25 amended by No 124 of 2013, s 3 and Sch 2 items 25 - 26, by inserting table item 6 at the end of the table dealing with tax losses of companies and table item 3 at the end of the table dealing with tax losses of trusts, effective 11 July 2013.

S 36-25 amended by No 88 of 2013, s 3 and Sch 6 items 51 - 54, by inserting " See also Division 160 (loss carry back tax offset) " at the end of table item dealing with tax losses of corporate tax entities, substituting table item 1 in table dealing with tax losses of pooled development funds (PDFs) and table item 1 in table dealing with tax losses of VCLPs, ESVCLPs, AFOFs and VCMPs, and substituting " utilised " for " deducted in a later income year " in table item 2 in table dealing with tax losses of pooled development funds (PDFs), effective 29 June 2013. The substituted table items formerly read:

Tax losses of pooled development funds (PDFs)

1. A company is a pooled development fund (PDF) at the end of an income year for which it has a tax loss: it can only deduct the loss while it is a PDF. Section 195-5

Tax losses of VCLPs, ESVCLPs, AFOFs and VCMPs

1. A limited partnership that has a tax loss becomes a VCLP, an ESVCLP, an AFOF or a VCMP: it cannot deduct the loss while it is a VCLP, an ESVCLP, an AFOF or a VCMP. Subdivision 195-B

S 36-25 amended by No 12 of 2012, s 3 and Sch 6 items 60 - 62, by substituting " life insurance company " for " *life insurance company " in table relating to tax losses of companies, item 5, " corporate tax entity that has an amount of excess franking offsets for an income year: it works out its tax loss " for " *corporate tax entity that has an amount of *excess franking offsets for an income year: it works out its *tax loss " in table relating to tax losses of corporate tax entities, item 1, and " foreign hybrid " for " *foreign hybrid " in table relating to tax losses of entities that become foreign hybrids, item 1, effective 21 March 2012.

S 36-25 amended by No 41 of 2011, s 3 and Sch 5 item 384, by substituting " in Schedule 2F " for " of Schedule 2F " wherever occurring, effective 27 June 2011.

S 36-25 amended by No 164 of 2007, s 3 and Sch 10 item 62, by inserting " Former " before " Subdivision " in table item 3 of the table headed " Tax losses of entities generally " , effective 1 July 2010.

S 36-25 amended by No 143 of 2007 , s 3 and Sch 1 item 141, by repealing table items 1 and 2 in the table headed " Tax losses of entities generally " , applicable in relation to income years, statutory accounting periods and notional accounting periods starting on or after the first 1 July that occurs after 24 September 2007. For savings provisions, see note under Div 770 heading . The items formerly read:

1. ... You *derived income with a foreign source: your tax loss is not deductible from your assessable foreign income unless you so choose. ... Section 79DA of the Income Tax Assessment Act 1936

2. ... You have deductions in relation to deriving income with a foreign source: the amount you can deduct is limited to your foreign income of the same class. ... Section 79D of the Income Tax Assessment Act 1936

S 36-25 amended by No 78 of 2007 , s 3 and Sch 8 item 104, by substituting the table headed " Tax losses of VCLPs, ESVCLPs, AFOFs and VCMPs " for the table headed " Tax losses of VCLPs, AFOFs and VCMPs " , applicable to assessments for the 2007-2008 year of income and later years of income. The table formerly read:

Tax losses of VCLPs, AFOFs and VCMPs

Item ... For the special rules about this situation ... See:

1. ... A limited partnership that has a tax loss becomes a VCLP, an AFOF or a VCMP: it cannot deduct the loss while it is a VCLP, an AFOF or a VCMP. ... Subdivision 195-B

S 36-25 amended by No 147 of 2005, No 101 of 2004, No 83 of 2004, No 142 of 2003, No 136 of 2002 and No 17 of 1998.

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