Commonwealth Consolidated Acts Commonwealth Consolidated ActsIncome Tax Assessment Act 1997
1 Before section 719 - 300
Insert:
719 - 250 What this Subdivision is about
This Subdivision modifies the rules about transferring and utilising losses so the rules operate appropriately in relation to MEC groups, taking account of the special characteristics of those groups. The modifications mainly affect:
(a) rules about maintaining the same ownership to be able to utilise a loss; and
(b) rules for working out how much of a loss can be utilised by reference to bundles of losses and their available fractions.
Table of sections
Maintaining the same ownership to be able to utilise loss
719 - 255 Special rules
719 - 260 Special test for utilising a loss because a company maintains the same owners
719 - 265 What is the test company?
719 - 270 Assumptions about the test company having made the loss for an income year
719 - 275 Assumptions about nothing happening to affect direct and indirect ownership of the test company
719 - 280 Assumptions about the test company failing to meet the conditions in section 165 - 12
Same business test and change of head company
719 - 285 Same business test and change of head company
Bundles of losses and their available fractions
719 - 300 Application
719 - 305 Subdivision 707 - C affects utilisation of losses made by ongoing head company while it was head company
719 - 310 Adjustment of available fractions for bundles of losses previously transferred to ongoing head company
719 - 315 Further adjustment of available fractions for all bundles
719 - 320 Limit on utilising losses other than the prior group losses
719 - 325 Cancellation of all losses in a bundle
[This is the end of the Guide.]
Maintaining the same ownership to be able to utilise loss
(1) This section and section 719 - 260 have effect for the purposes of working out whether a loss can be * utilised for an income year (the claim year ) by a company (the focal company ) that made the loss if:
(a) section 165 - 12 is relevant to the question whether the focal company can utilise the loss; and
(b) the focal company is the * head company of a * MEC group at any time in its * ownership test period for the loss (as affected by section 707 - 205, if relevant).
Note: If the focal company made the loss because of a transfer under Subdivision 707 - A, section 707 - 205 has the effect that the ownership test period starts for the focal company at the time of the transfer.
Section 707 - 210 does not have effect
(2) Section 707 - 210 does not have effect for the purposes of working out whether the focal company can * utilise the loss for the claim year.
Note: Section 707 - 210 is about whether a company can utilise a loss it made because the loss was transferred to it under Subdivision 707 - A because the transferor met the conditions in section 165 - 12.
719 - 260 Special test for utilising a loss because a company maintains the same owners
Meeting the conditions in section 165 - 12
(1) The focal company is taken to meet the conditions in section 165 - 12 for the claim year and the loss if and only if the company (the test company ) identified in relation to the focal company in accordance with section 719 - 265 would have met those conditions for that year on the relevant assumptions in:
(a) section 719 - 270 (which is about assuming the test company made the loss for a particular income year); and
(b) section 719 - 275 (which is about assuming that nothing happened in relation to certain things that would affect whether the test company would meet those conditions); and
(c) section 719 - 280 (which is about assuming that the test company would have failed to meet those conditions in certain circumstances).
Focal company's failure to meet conditions in section 165 - 12
(2) The focal company is taken to fail to meet a condition in section 165 - 12 only at:
(a) the first time the test company would have failed to meet the condition on the relevant assumptions mentioned in subsection ( 1); or
(b) the * test time described in subsection 166 - 5(5) for the test company, if:
(i) Division 166 is relevant to working out whether the test company could have * utilised the loss for the claim year on the relevant assumptions mentioned in paragraphs ( 1)(a) and (b); and
(ii) the test company is not assumed under section 719 - 280 to fail to meet the condition before the test time.
Note: If the focal company is taken to fail to meet a condition in section 165 - 12, the focal company will not be able to utilise the loss for the claim year unless the focal company meets the conditions in section 165 - 13 by satisfying the same business test. That test applies to the focal company (and not the test company).
Same business test for focal company under Division 166
(3) If subsection 166 - 5(4) affects whether the focal company can * utilise the loss for the claim year because the focal company is a * listed public company or a * 100% subsidiary of one for the year, subsection 166 - 5(5) operates as if it required the * same business test to be applied to the * business the focal company carried on just before the time described in subsection ( 2) of this section.
Same business test for focal company to transfer loss
(4) If subsection 707 - 125(4) is relevant to working out whether the focal company can transfer the loss to a company under Subdivision 707 - A, that subsection:
(a) has effect as if subsection 707 - 125(5) described the focal company's income year containing the time at which the focal company is taken under subsection ( 2) of this section to fail to meet a condition in section 165 - 12; and
(b) has effect despite subsection ( 3) of this section.
Note: For working out whether certain losses can be transferred under Subdivision 707 - A, subsection 707 - 125(4) modifies the operation of subsection 166 - 5(5) by extending the same business test period to include the income year described in subsection 707 - 125(5).
719 - 265 What is the test company?
(1) To identify for the purposes of section 719 - 260 the company that is the test company for the focal company for the loss:
(a) first, identify the test company for the focal company by applying whichever one of subsections ( 2), (3), (4) and (6) is relevant; and
(b) then, if the condition in column 1 of an item of the table is met, apply this section again to identify the test company as if the company described in column 2 of the item were the focal company, taking account only of things that happened before the event described in column 3 of the item.
Repeated application of this section | |||
| Column 1 | Column 2 | Column 3 |
1 | Under subsection ( 2) as the company that is the test company for the transferor | The transferor mentioned in subsection ( 2) | The transfer mentioned in subsection ( 2) |
2 | Under subsection ( 6) as the company that is the test company for the first head company | The first head company mentioned in subsection ( 6) | The first head company ceasing to be the * head company of the * MEC group mentioned in subsection ( 6) |
Note: More than 2 applications of this section may be needed to identify the test company for the focal company.
COT transfer of loss to focal company
(2) The test company for the focal company is the company described in column 2 of the relevant item of the table if the focal company made the loss because of a * COT transfer to the focal company.
Test company for the focal company | ||
| Column 1
| Column 2 |
1 | The focal company and the transferor are the same company | The focal company |
2 | The focal company and the transferor are different companies | The company that is the test company for the transferor |
Loss transferred because same business test satisfied
(3) The test company for the focal company is the company described in column 2 of the relevant item of the table if the focal company made the loss because the loss was transferred under Subdivision 707 - A to the focal company from a company because it satisfied the * same business test for:
(a) the * same business test period; and
(b) the * test time specified in Division 165 or 166 or section 707 - 125.
Test company for the focal company | ||
| Column 1 | Column 2 |
1 | The focal company was the * head company of a * MEC group at the time of the transfer | The company that was the * top company for the MEC group at the time of the transfer |
2 | The focal company was not the * head company of a * MEC group at the time of the transfer | The focal company |
Loss not transferred from a company
(4) The test company for the focal company is the company described in column 2 of the relevant item of the table if the focal company made the loss apart from a transfer of the loss under Subdivision 707 - A from a company.
Test company for the focal company | ||
| Column 1 | Column 2 |
1 | The focal company made the loss apart from Subdivision 707 - A and was the * head company of a * MEC group at the start of the income year for which it made the loss | The company that was the * top company for the MEC group at the start of the income year |
2 | The focal company made the loss because it was transferred under Subdivision 707 - A to the focal company as the * head company of a * MEC group from an entity other than a company | The company that was the * top company for the MEC group at the time of the transfer |
3 | Neither item 1 nor item 2 applies | The focal company |
Relationship between subsections ( 2), (3) and (4)
(5) Subsection ( 2) or (3), and not subsection ( 4), is relevant for identifying the test company for the focal company if the focal company made the loss apart from a transfer under Subdivision 707 - A, and later transferred the loss to itself under that Subdivision.
Change of head company
(6) If, under section 719 - 90, the focal company is taken to have made the loss because:
(a) a company (the first head company ) other than the focal company made the loss apart from that section and either:
(i) was the * head company of a * MEC group at any time during the income year for which it made the loss; or
(ii) became the head company of a MEC group after that income year (without having been a * subsidiary member of the group before becoming the head company); and
(b) the focal company was later the head company of the MEC group;
the test company for the focal company is the company that is the test company for the first head company.
Note: Section 719 - 90 applies if there is a change in the head company of a MEC group, treating the later head company as if what had happened to the earlier head company had happened to the later head company.
(7) Subsections ( 2), (3) and (4) and section 719 - 90 have effect subject to subsection ( 6) of this section.
719 - 270 Assumptions about the test company having made the loss for an income year
If test company was top company for focal company's MEC group
(1) If the test company was the * top company for a * MEC group and the focal company is or was the * head company of that MEC group, assume that the test company made the loss for an income year starting at the relevant time shown in the table.
Start of income year for which test company is assumed to have made loss | ||
| If: | The relevant time is: |
1 | The focal company made the loss apart from Subdivision 707 - A | The start of the income year for which the focal company made the loss |
2 | The focal company made the loss because it was transferred to the focal company under Subdivision 707 - A | The time of the transfer |
Note: Subsection ( 1) applies even if the test company is still the top company for the MEC group at the end of the claim year.
If test company is focal company or first head company
(2) If the test company is:
(a) the focal company; or
(b) the first head company identified in subsection 719 - 265(6) by reference to the focal company;
assume that the test company made the loss for an income year starting at the relevant time shown in the table.
Start of income year for which test company is assumed to have made loss | ||
| If: | The relevant time is: |
1 | The test company made the loss apart from Subdivision 707 - A (even if the test company later transferred the loss to itself in a * COT transfer) | The start of the income year for which the test company made the loss |
2 | The test company made the loss because it was transferred to the test company under Subdivision 707 - A in a transfer other than a * COT transfer (even if the test company first made the loss apart from that Subdivision) | The time of the transfer |
(3) If the test company is the first head company, disregard section 719 - 90 for the purposes of working out the relevant time using the table in subsection ( 2) of this section.
Note: This ensures that section 719 - 90 does not make the items in the table inapplicable by treating the test company as if another company had made the loss instead of the test company.
If subsections ( 1) and (2) do not apply
(4) If neither subsection ( 1) nor subsection ( 2) applies, assume that the test company made the loss for an income year starting at the relevant time shown in the table.
Start of income year for which test company is assumed to have made loss | ||
| If: | The relevant time is: |
1 | The test company made the loss apart from Subdivision 707 - A (even if the test company later transferred the loss to itself in a * COT transfer) | The start of the income year for which the test company made the loss |
2 | The test company made the loss because it was transferred to the test company under Subdivision 707 - A in a transfer other than a * COT transfer (even if the test company first made the loss apart from that Subdivision) | The time of the transfer |
3 | The test company is the test company for the focal company for the loss because the test company was the * top company for a * MEC group whose * head company made the loss before it was transferred to the focal company under Subdivision 707 - A | The time that was the relevant time under subsection ( 1) for the test company as the test company for the first company for which the test company was the test company for the loss |
Note: Subsection ( 4) applies if the focal company made the loss because of a COT transfer of the loss to the focal company from another company.
(5) Disregard section 719 - 90 for the purposes of items 1 and 2 of the table in subsection ( 4) of this section if the test company was identified using subsection 719 - 265(6).
Note: This ensures that section 719 - 90 does not make those items inapplicable by treating the test company as if another company had made the loss instead of the test company.
Other events do not override assumption
(6) If the test company transferred the loss to itself or another company under Subdivision 707 - A, assume that the transfer did not affect, for income years ending after the transfer:
(a) the fact that the test company made the loss; or
(b) the income year for which the test company is assumed (under subsection ( 1), (2) or (4)) to have made the loss.
(1) This section sets out an assumption that must be made whenever an event described in subsection ( 2) occurs:
(a) after the time assumed under section 719 - 270 to be the start of the income year for which the test company made the loss; and
(b) before the end of the claim year;
(whether or not the test company or the focal company is one of the companies mentioned in the description of the event).
(2) Assume that, after an event described in an item of the table, nothing happens in relation to * membership interests or voting power in an entity described in the item that would affect whether the test company would meet the conditions in section 165 - 12 for the claim year and the loss.
Assumption about nothing happening to membership interests or voting power | ||
| If this event occurs: | Assume that nothing happens in relation to membership interests or voting power in: |
1 | There is a * COT transfer of the loss to the * head company of a * MEC group (but not from a company that was the head company of another MEC group just before the transfer) | The transferor or an entity that was at the time of the transfer interposed between the transferor and the * top company for the MEC group |
2 | There is a * COT transfer of the loss to the * head company of a * MEC group from a company that was the head company of another MEC group just before the transfer | The company that was just before the transfer the * top company for the other MEC group, or an entity that was at the time of the transfer interposed between that company and the top company of the MEC group to whose head company the loss was transferred |
3 | There is a change in the identity of the * top company for a * MEC group whose * head company has made the loss | The company that ceased to be the top company for the MEC group as part of the change or an entity that was at the time of the change interposed between that company and the company that became the top company for the MEC group as part of the change |
4 | A company that has made the loss becomes at a time the * head company of a * MEC group (as the first company to be the head company of the group) and has not before that time transferred the loss to another company under Subdivision 707 - A | The company or an entity that was at the time interposed between the company and the * top company for the MEC group |
5 | There is a * COT transfer of the loss to the * head company of a * consolidated group from another company | The other company or an entity that was at the time of the transfer interposed between the other company and the head company |
(3) For the purposes of this section, a company is taken to make a loss:
(a) at the start of the income year for which the company makes the loss, if it makes the loss apart from a transfer under Subdivision 707 - A (even if the company later transfers the loss to itself under that Subdivision); or
(b) at the time the loss is transferred to the company under that Subdivision, if the company makes the loss because of that transfer.
(4) Disregard section 719 - 90 for the purposes of making an assumption on the basis of item 1 of the table in subsection ( 2) of this section if (apart from that section):
(a) the * COT transfer mentioned in that item was from the * head company of the * MEC group to itself; and
(b) for an income year starting after the transfer, another company was the head company of the group.
719 - 280 Assumptions about the test company failing to meet the conditions in section 165 - 12
(1) Assume that the test company fails to meet the conditions in section 165 - 12 at the time an event described in subsection ( 2), (3) or (4) happens after the start of the * ownership test period for the focal company in relation to:
(a) the * MEC group whose * head company was the focal company; or
(b) the * potential MEC group whose membership was the same as the membership of that MEC group.
Note: If the test company is assumed to fail to meet the conditions in section 165 - 12 for the claim year and the loss, the focal company is taken (under section 719 - 260) to have failed to meet those conditions.
(2) One event is the * potential MEC group ceasing to exist.
(3) Another event is something happening that meets these conditions:
(a) the thing happens at a time in relation to * membership interests in one or more of these entities:
(i) a company that was just before that time a * member of the * MEC group and an * eligible tier - 1 company of the * top company for the MEC group;
(ii) an entity interposed between a company described in subparagraph ( i) and the company that was the top company for the group just before that time;
(b) the thing does not cause the * potential MEC group to cease to exist but does cause a change in the identity of the top company for the potential MEC group.
(4) Another event is the * MEC group ceasing to exist because there ceases to be a * provisional head company of the group.
Other causes of failure to meet conditions in section 165 - 12
(5) To avoid doubt, this section does not limit the circumstances in which the test company would have failed to meet the conditions in section 165 - 12 on the relevant assumptions set out in sections 719 - 270 and 719 - 275.
Same business test and change of head company
719 - 285 Same business test and change of head company
In working out whether the * same business test is satisfied by a company that, after the * test time, became the * head company of a * MEC group that existed before that time, disregard what happened in relation to the company before it became a * member of the group. Section 719 - 90 has effect subject to this section.
Note 1: The same business test is to be applied on the basis that the company's business at the test time was the business that section 719 - 90 treats the company as having carried on at that time, except to the extent that section 719 - 90 attributes to the company its actual history before it became a member of the MEC group.
Note 2: Section 719 - 90 applies if there is a change in the head company of a MEC group, treating the later head company as if what had happened to the earlier head company had happened to the later head company.
[The next section is section 719 - 300.]
Bundles of losses and their available fractions
Income Tax Assessment Act 1997
2 Subsection 707 - 210(1)
Repeal the subsection, substitute:
(1) This section has effect for the purposes of working out whether a company (the latest transferee ) can * utilise for an income year a loss it made because of a * COT transfer from a company (the latest transferor ).
(1A) A transfer of a loss under Subdivision 707 - A from a company to a company is a COT transfer of the loss if the transfer occurs because:
(a) the transferor meets the conditions in section 165 - 12; and
(b) the conditions in one or more of paragraphs 165 - 15(1)(a), (b) and (c) do not exist in relation to the transferor.
3 Paragraph 707 - 210(3)(b)
Repeal the paragraph, substitute:
(b) one or more of those earlier transfers was not a * COT transfer;
4 Subsection 995 - 1(1)
Insert:
"COT transfer" of a loss has the meaning given by section 707 - 210.
5 Application of amendment of subsection 995 - 1(1)
The amendment of subsection 995 - 1(1) of the Income Tax Assessment Act 1997 made by this Schedule applies on and after 1 July 2002.