Income Tax (Transitional Provisions) Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 707 - Losses for head companies when entities become members, etc  

Subdivision 707-C - Amount of transferred losses that can be utilised  

SECTION 707-327   Choosing available fraction to apply to value donor ' s loss  
Conditions for choosing available fraction for value donor ' s loss

707-327(1)    
This section has effect for the purposes of working out under Subdivision 707-C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if:

(a) the available fraction for a bundle of other losses is worked out, because of section 707-325 , as if there were added to the modified market value of the real loss-maker of the other losses an amount worked out under that section by reference to the value donor ' s modified market value; and

(b) the loss was transferred under Subdivision 707-A of that Act at the initial transfer time from the value donor ; and

(c) the loss is not a loss whose utilisation is affected by section 707-350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and

(d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707-A of that Act at the initial transfer time had the company:

(i) made the loss for the income year for which the value donor made it; and

(ii) not utilised it; and

(e) the requirement in subsection (3) is met.

Note:

This section has effect even if the amount added to the real loss-maker ' s modified market value under section 707-325 is nil because the value donor ' s modified market value is nil.

707-327(2)    
This subsection covers:

(a) the real loss-maker; and

(b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707-325 , as if there were added to the real loss-maker ' s modified market value an amount worked out by reference to the company.

707-327(3)    
It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170-A or 170-B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707-328 had the conditions in that section existed.

Treating value donor ' s loss as included in bundle

707-327(4)    
If the transferee mentioned in subsection 707-325(1) chooses, sections 707-310 , 707-335 (except paragraph 707-335(2) (a)) and 707-340 of the Income Tax Assessment Act 1997 (and subsections 707-315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time:

(a) the bundle of losses included the loss; and

(b) the loss was not included in any other bundle of losses.

Note:

This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses.

Choice to treat value donor ' s loss as included in bundle

707-327(5)    
A choice for the purposes of subsection (4):

(a) may be made only by the later of:

(i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707-350 ) losses transferred to it under Subdivision 707-A of the Income Tax Assessment Act 1997 ; and

(ii) the end of 31 December 2005; and

(b) cannot be revoked after 31 December 2005.

Note:

For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713-535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707-355 of this Act.

Loss already in bundle with increased available fraction

707-327(6)    
Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707-325(1) (d) and (e) and subsection 707-325(2) in an application of section 707-325 separate from the application of that section mentioned in paragraph (1)(a) of this section.

Note:

This means that a loss that provided a basis for section 707-325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses.