ATO ID 2012/57: Assessments for the 2003-04 and earlier nil years: notifying the Commissioner in the approved form for the purposes of item 4 of the table in subsection 171A(1) of the Income Tax Assessment Act 1936
Date of decision: 20 June 2012
Year of income: Year ended 30 June 2003
Business line: Private Groups and High Wealth Individuals

Issue
Does disclosure by a company of an amount of tax losses deducted at label R of item 7 of its company income tax return for the 2004-05 income year provide notification to the Commissioner, in the approved form, for the purposes of item 4 of the table in subsection 171A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the company is not required to complete a Losses schedule 2005?

Decision
Yes, where a company is not required to complete the Losses schedule 2005 and it discloses an amount of tax losses deducted at label R of item 7 of its company income tax return for the 2004-05 income year, it is at this point that the company notifies the Commissioner, in the approved form, that it had a tax loss in an earlier nil year that is carried forward to the 2004-05 income year for the purposes of item 4 of the table in subsection 171A(1) of the ITAA 1936.

Facts
Company X incurred a tax loss in the 2002-03 income year and consequently lodged a nil liability company income tax return for the 2002-03 income year in June 2004. Company X utilised a portion of this carried forward loss in the 2003-04 income year and carried forward the remainder to the 2004-05 income year where the loss was fully utilised. Company X lodged its company income tax return for the 2004-05 income year in July 2006. Company X disclosed an amount of tax loses deducted in the 2004-05 income year at label R of item 7 of the income tax return. The amount of the loss carried forward to the 2004-05 income year was not large enough to require the lodgment of a Losses schedule 2005 and Company X did not meet any of the other conditions for lodging this schedule. Company X is not a member of a consolidated group at the end of the 2004-05 income year.

Reasons for decision
Summary: Section 171A of the ITAA 1936 limits the period within which the Commissioner can make an original assessment for nil liability income tax returns for the 2003-04 and earlier income years. Essentially, an original assessment can only be made for these nil years within a limited period according to the circumstances and information provided to the Commissioner. This is tabled in subsection 171A(1) of the ITAA 1936. Item 4 of the table in subsection 171A(1) of the ITAA 1936 provides that where: The approved form for the purposes of item 4 of the table in subsection 171A(1) of the ITAA 1936 is the Losses schedule 2005 that taxpayers are required to complete and send together with their 2004-05 income tax returns. Where a taxpayer does not meet the conditions for lodging a Losses schedule 2005, disclosure of the amount of tax losses deducted at label R of item 7 in the 2004-05 income tax return constitutes notification to the Commissioner, in the approved form, that the taxpayer had a tax loss in the earlier nil year that is carried forward to the 2004-05 income year for the purposes of item 4 of the table in subsection 171A of the ITAA 1936. In this case Company X made a tax loss and lodged a nil liability company income tax return for the 2002-03 income year in June 2004. Some of Company X's tax loss from the 2002-2003 income year was carried forward to the 2004-05 income year as evidenced by it disclosing an amount of tax loss deducted at label R of Item 7 in its 2004-05 company income tax return. Company X was not required to lodge a Losses schedule 2005. For the purposes of item 4 of the table in subsection 171A(1) of the ITAA 1936, Company X notified the Commissioner in the approved form when it lodged its company income tax return in July 2006. Accordingly, the Commissioner has until July 2012 to issue Company X an original assessment for the 2002-03 income year.

Legislative references: Income Tax Assessment Act 1936 section 171A subsection 171A(1)
Subject references: Carry forward losses Losses carried forward Original assessments Tax loss Unused carry forward losses