ATO ID 2008/12: Company Tax Losses: loss company is a 100% subsidiary of more than one listed public company during the test period - whether the former concessional tracing rules apply
Date of decision: 20 December 2007
Year of income: Year ended 31 December 2002
Business line: Public Groups and International

Issue
Does the former Division 166 of the Income Tax Assessment Act 1997 (ITAA 1997) apply where the loss company was a 100% subsidiary of more than one listed public company during the relevant test period?

Decision
No. The loss company must be a 100% subsidiary of the same listed public company at all times during the test period.

Facts
Company A has a tax loss for an earlier income year (the loss year) which it seeks to deduct in a later income year. At the start of the loss year, company A was a 100% subsidiary of a listed public company (company B). Subsequently, company A ceased to be a 100% subsidiary of company B and immediately became a 100% subsidiary of another listed public company (company C). Company A remained a 100% subsidiary of company C until the end of the test period. Company B and company C were both listed public companies at all times during the test period. Note: Division 166 of the ITAA 1997 was significantly amended by the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005. The former Division 166 of the ITAA 1997 (former Division 166) applies to company A in accordance with item 170 of Schedule 1 to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act.

Reasons for decision
Summary: The former section 166-10 of the ITAA 1997 provided: 166-10(1) This Subdivision [Subdivision 166-A] also modifies the way Subdivision 165-A applies to a company that is not a *listed public company, but only if the conditions in subsections (2) and (3) are met. Note: Subdivision 165-A is about the conditions a company must satisfy before it can deduct a tax loss for an earlier income year. 166-10(2) The company (the subsidiary) must be a *100% subsidiary of another company (the holding company) at all times during a period consisting of: (a) the *loss year of the subsidiary; and (b) the income year of the subsidiary; and (c) any intervening period. The former Division 166 of the ITAA 1997 would only apply if company A satisfied the conditions in the former subsections 166-10(2) and 166-10(3) of the ITAA 1997. The singular expression used in the former subsections 166-10(2) and 166-10(3) of the ITAA 1997 in relation to 'the holding company' and 'a listed public company' indicate that the former Division 166 of the ITAA 1997 would only apply if company A was a 100% subsidiary of the same holding company at all times during the test period consisting of the loss year, the income year and any intervening period. In addition, the holding company had to be a listed public company at all times during the test period. Therefore, the former Division 166 of the ITAA 1997 does not apply to company A as it was not a 100% subsidiary of the same listed public company at all times during the test period. .

Legislative references: Income Tax Assessment Act 1997 Subdivision 165-A former Division 166 former Subdivision 166-A former section 166-10 former subsection 166-10(1) former subsection 166-10(2) former subsection 166-10(3) former subsection 166-10(4)
Subject references: Wholly owned subsidiary Holding companies Public company Tax loss