New Business Tax System (Consolidation and Other Measures) Act 2003 (16 of 2003)

Schedule 19   Consolidation: amendment of losses rules

Income Tax (Transitional Provisions) Act 1997

4   After section 707-325

Insert:

707-326 Events involving only value donor and real loss-maker not covered by rule against inflation of modified market value

(1) This section affects the calculation of the modified market value of the real loss-maker mentioned in subsection 707-315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation:

(a) only if section 707-325 of this Act applies for the purposes of working out the available fraction for the bundle; and

(b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in section 160AFD of the Income Tax Assessment Act 1936, in the bundle).

Note: This section does not affect the calculation of the real loss-maker's modified market value for other purposes (such as the real loss-maker being a value donor for the purposes of another application of section 707-325 of this Act).

(2) Disregard for the purposes of subsection 707-325(2) of the Income Tax Assessment Act 1997 an event:

(a) that is described in subsection 707-325(4) of that Act; and

(b) that meets the condition in subsection (3) or (4) of this section.

(3) One condition is that the event was an injection of capital directly into the real loss-maker by the value donor mentioned in section 707-325 of this Act.

(4) The other condition is that the event was a transaction:

(a) that did not take place at arm's length; and

(b) that involved only the real loss-maker and the value donor mentioned in section 707-325 of this Act; and

(c) that would have caused subsection 707-325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss-maker's modified market value (even if no other events described in subsection 707-325(4) of that Act had occurred), apart from this section.

(5) Subsection (2) of this section does not apply if subsection 707-325(2) of the Income Tax Assessment Act 1997:

(a) operates for the purposes of working out the value donor's modified market value because of an event that involved an entity other than the value donor and the real loss-maker (whether or not the event also involved either the value donor or the real loss-maker); or

(b) would operate for those purposes because of such an event apart from another application of this section.