Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) The main object of this Subdivision is to limit, in a way that gives effect to the principles in subsections (2) and (3), the amount of losses transferred under Subdivision 707 - A that can be * utilised for an income year by the transferee.
(2) One principle is that the transferee is to * utilise the transferred losses for an income year only to the extent to which it has income or gains for the income year remaining after reduction by its other losses and deductions.
(3) The other principle is that the amount of a transferred loss that the transferee can * utilise is to reflect the amount of the loss that the transferor could have * utilised for the income year if the transferor of the loss (whether the original maker of the loss or not) had not become a * member of a * consolidated group at the time of the transfer.
(4) To give effect to those principles, this Subdivision operates on the assumption that, if each transferor of a loss to the transferee had not become a * member of a * consolidated group at the time of the transfer:
(a) all the transferors of transferred losses to the transferee would have made income or gains for the year whose total did not exceed the transferee's income or gains for the year remaining after reduction by its other losses and deductions; and
(b) a particular transferor's income or gains for the year would have equalled a fraction of the transferee's income or gains for the year remaining after reduction by its other losses and deductions.
(5) The fraction is worked out by reference to the transferor's * market value at the time of the transfer (on the assumption that market value reflects capacity to generate income or gains in future).