New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002 (117 of 2002)

Schedule 12   Consolidation: amendments relating to Division 170

Income Tax Assessment Act 1997

4   After section 170-30

Insert:

170-32 Tax loss incurred by the loss company because of a transfer under Subdivision 707-A

When the conditions in this section apply

(1) The conditions in this section apply instead of the conditions in subsections 170-30(1) and (2) if:

(a) the*income company is an Australian branch (as defined in Part IIIB of theIncome Tax Assessment Act 1936) of a*foreign bank; and

(b) the*loss company incurred the*tax loss because of one or more transfers of the tax loss under Subdivision 707-A.

Conditions

(2) Each transferor ( prior transferor ) of the*tax loss under Subdivision 707-A must have been a company.

(3) It must have been possible to meet the conditions in subsections 170-30(1) and (2) in relation to the*loss company and the*income company assuming:

(a) the*loss year were so much of the income year in which the*tax loss was transferred to the loss company under Subdivision 707-A as occurred after the transfer; and

(b) so much (if any) of the*deduction year as occurred before the transfer were disregarded.

(4) The*income company and each prior transferor must both be*in existence during at least part of each of these periods:

(a) the period consisting of:

(i) if the prior transferor incurred the*tax loss apart from Subdivision 707-A - the*loss year; or

(ii) if the prior transferor incurred the tax loss because of a transfer under Subdivision 707-A (other than a transfer from the prior transferor to itself) - so much of the income year in which the transfer occurred as was after the transfer (but before any later transfer of the loss from the prior transferor under that Subdivision);

(b) so much of the income year during which the tax loss was transferred under Subdivision 707-A from the prior transferor to another company as occurs before the transfer (but after the start of the period described in paragraph (a));

(c) any intervening income year.

(5) The*income company must be a member of the same*wholly-owned group as each prior transferor during the whole or part of the periods described in subsection (4) for the prior transferor when both were*in existence.

170-33 Alternative test of relations between the loss company and other companies

(1) The conditions in subsections 170-30(1) and (2) are taken to be met in relation to the*loss company and the*income company if:

(a) the loss company is an Australian branch (as defined in Part IIIB of theIncome Tax Assessment Act 1936) of a*foreign bank; and

(b) the income company is covered by item 1 or 2 of the table in subsection 170-30(4) (because the company is the*head company of a*consolidated group or*MEC group at the time described in that item); and

(c) the relevant circumstances in this section exist.

Circumstances

(2) One circumstance is that there is another company (the first link company ) in relation to which all these conditions are met:

(a) the first link company became a*subsidiary member of a*consolidated group or*MEC group after the start of the*loss year but before the time described in the item of the table in subsection 170-30(4) that covers the*income company;

(b) the*tax loss could have been transferred from the*loss company to the first link company under this Subdivision (apart from subsection 170-30(4) and this section) for a*deduction year consisting of the*trial year for the first link company becoming a subsidiary member of that group had:

(i) the first link company continued to be*in existence as a separate entity (rather than being part of the head company of that group) when it was a subsidiary member of that group; and

(ii) the trial year not started before the start of the loss year; and

(iii) the first link company had enough assessable income for the trial year;

(c) the tax loss would have been incurred by the income company because of one or more transfers under Subdivision 707-A assuming the tax loss had been made by the first link company (apart from that Subdivision) for the loss year.

(3) If the condition in paragraph (2)(c) could be met only if there had been a transfer described in that paragraph involving a company other than the first link company and the*income company, another circumstance is that the other company and the*loss company were*in existence and members of the same*wholly-owned group for the period:

(a) starting when the*tax loss would have been transferred under Subdivision 707-Ato the other company as described in that paragraph; and

(b) ending when the tax loss would have been transferred under Subdivision 707-Afrom the other company as described in that paragraph.

(4) It does not matter whether or not any of the transfers mentioned in subsection (3) would have involved the first link company or the*income company as well as the other company.

(5) Another circumstance is that the conditions in subsections 170-30(1) and (2) would have been met for the*loss company and the*income company assuming:

(a) the*loss year consisted of the part of the income year in which the*tax loss would have been transferred to the income company under Subdivision 707-A as described in paragraph (2)(c) occurring after the time the transfer would have occurred; and

(b) so much (if any) of the*deduction year as occurred before the time the transfer would have occurred were disregarded.