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 707-350   Alternative loss utilisation regime to Subdivision 707-C of the Income Tax Assessment Act 1997  

707-350(1)    
This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707-A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if:

(a) they were actually made (disregarding that Subdivision) by a company (the real loss-maker ) for an income year ending on or before 21 September 1999; and

(b) they were transferred at the time (the initial transfer time ) the transferee became the head company of a consolidated group; and

(c) they were transferred to the transferee from the real loss-maker because:

(i) the real loss-maker met the conditions in section 165-12 of that Act; and

(ii) the conditions in one or more of paragraphs 165-15(1) (a), (b) and (c) did not exist in relation to the real loss-maker; and

(d) none of them had been transferred under that Subdivision before the initial transfer time; and

(da) the real loss-maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D-10(1) from being a subsidiary member of a consolidated group; and

(e) the transferee has made a choice under subsection (5).

Losses to be utilised only after non-transferred losses

707-350(2)    
The transferee may utilise for an income year the losses only after utilising for the year losses (the non-transferred losses ) of the same sort that the transferee made without a transfer under Subdivision 707-A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non-transferred losses).

Further limit on utilising the losses

707-350(3)    
The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table.

Graphic

Graphic

Limit on utilising the losses
Item	For this income year:	The amount of the losses that the transferee may utilise cannot exceed:
1	The first income year ending after the initial transfer time	1/3 of the total of the amounts of the losses that were transferred to the transferee
2	The second income year ending after the initial transfer time	The difference between: (a) 2/3 of the total of the amounts of the losses that were transferred to the transferee; and (b) the amount of the losses utilised for the income year mentioned in item 1
3	The third income year ending after the initial transfer time, or a later income year	The difference between: (a) the total of the amounts of the losses that were transferred to the transferee; and (b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time

Subdivision 707-C of Income Tax Assessment Act 1997 disapplied

707-350(4)    
Subdivision 707-C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707-A of that Act.

Note:

This has 2 effects. First, Subdivision 707-C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee's income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707-A of that Act).

Making choice

707-350(5)    
The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of:

(a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707-A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and

(b) the end of 31 December 2005.

Note:

For the purposes of paragraph (5)(a), 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.

When choice has effect

707-350(6)    

The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005).

Future transfer of the losses not affected

707-350(7)    
This section does not limit the transfer under Subdivision 707-A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company.