ATO ID 2003/783: Company loss transfers: loss transfer agreements - subsequent agreement to transfer tax loss in an earlier income year than previously transferred
Date of decision: 21 July 2003
Year of income: Year ended 30 June 2003
Business line: Public Groups and International

Issue
Where members of the same wholly owned company group enter into a valid loss transfer agreement in accordance with Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997), can those same members enter into a subsequent agreement to transfer the same loss in an earlier income year?

Decision
No. A specific consequence of a valid transfer of an amount of a tax loss under Subdivision 170-A of the ITAA 1997 is that the loss company is taken never to have incurred that loss once it has been validly transferred.

Facts
Loss Company and Income Company enter into a valid loss transfer agreement under Subdivision 170-A of the ITAA 1997 to transfer a tax loss in the deduction year. The loss was incurred by Loss Company in an earlier income year (the loss year). Income Company subsequently determines that it had additional assessable income in an income year between the loss year and deduction year (the intervening income year). The public officers of Income Company and Loss Company propose to enter into a subsequent loss transfer agreement that transfers the loss previously transferred in the deduction year in the intervening income year.

Reasons for decision
Summary: Subdivision 170-A provides the legislative basis to permit the transfer of tax losses between members of the same wholly-owned group of companies where certain conditions are satisfied. Specific consequences of a valid transfer of an amount of a tax loss are: Taxation Ruling TR 98/12 at paragraph 11 states that: ... subsections 80G(6) and (12) (section 170-15 and subsection 170-20(2)) operate to deem an agreed amount of loss to have been incurred by the income company and not to have been incurred by the loss company at the time a valid transfer document is executed. This means that the relevant amount of loss is no longer available to be dealt with by the loss company. Accordingly, any subsequent loss transfer agreement made by the loss company to transfer an amount of tax loss that has been validly transferred is ineffective, as that tax loss is no longer available to the loss company for it to transfer.

Legislative references: Income Tax Assessment Act 1936 subsection 80G(6) subsection 80G(12)
Related public rulings and determinations: Taxation Ruling TR 98/12
Subject references: Companies Group companies Group company loss transfers