ATO ID 2003/78: Group company net capital loss transfers: valid transfer agreement - single document with multiple agreements
Date of decision: 23 January 2003
Year of income: Year ended 30 June 2002
Business line: Public Groups and International

Issue
Can a loss company validly transfer various amounts of net capital losses to two or more gain companies in a single document (the Document) for the purposes of section 170-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. As the Document satisfies the requirements of subsection 170-150(2) of the ITAA 1997, the fact that it incorporates several written agreements does not of itself invalidate those agreements.

Facts
The public officer of a loss company and the public officer of several gain companies in a wholly owned group agreed for the loss company to transfer various amounts of net capital loss incurred by the loss company to the several gain companies in respect of an income year that ended after 30 June 1998. Rather than preparing a separate written agreement for each loss transfer, the public officer for the loss company and the public officer for the several gain companies incorporated the relevant written agreements for the purposes of section 170-150 of the ITAA 1997 in the Document. The Document was signed by the public officers of the loss company and the several gain companies. It stated that various amounts of net capital loss are transferred from the loss company to the gain companies in accordance with the attached schedule. The schedule specified for each loss transfer: Each written agreement that formed part of the Document was made within the requisite period specified in paragraph 170-150(2)(d) of the ITAA 1997. In order to address the possibility that the loss company is subsequently found to have insufficient net capital losses available to satisfy all of the several written agreements contained in the Document, the Document specified the order in which the net capital loss agreements were entered into.

Reasons for decision
Summary: Subsection 170-150(1) of the ITAA 1997 requires that a transfer of a net capital loss must be made by a written agreement. The ITAA 1997 does not prescribe that the written agreement must be in any particular form. However, subsection 170-150(2) of the ITAA 1997 states that the agreement must: As the Document satisfies the above requirements of section 170-150 of the ITAA 1997, the fact that it incorporates several written agreements does not of itself invalidate those agreements. Subdivision 170-B (sections 170-101 to 170-170) of the ITAA 1997 applies to assessments for the year ended 30 June 1999 and later income years.

Legislative references: Income Tax Assessment Act 1997 Subdivision 170-B section 170-150 subsection 170-150(1) subsection 170-150(2) paragraph 170-150(2)(d)
Related public rulings and determinations: Taxation Ruling TR 98/12
Related ATO interpretative decisions: ATO ID 2003/123 | ATO ID 2003/124
Subject references: Group company loss transfers Company losses Carry forward losses Losses Current year losses Losses CoE