Document ID: chunk:federal_register_of_legislation:C2004C00958:schedule:2:p3
Version: federal_register_of_legislation:C2004C00958
Segment Type: schedule
Provision Reference: sch 2 (pt 3/4)
Character Range: 887281–889981

ownership or control of a company. Subdivision 175‑CA deals with using a company's net capital losses to avoid income tax.

Note 2: A company's net capital gain or net capital loss for an income year is usually worked out under section 102‑5.

170‑140  The gain company

 (1) If the capital loss year and the application year are not the same, the gain company must not be prevented by Subdivision 165‑CA or 175‑CA from applying the transferred amount in working out its *net capital gain for the application year.

Note 1: Subdivision 165‑CA deals with the consequences of changing ownership or control of a company. Subdivision 175‑CA deals with using a company's net capital losses to avoid income tax.

Note 2: A company's net capital gain or net capital loss for an income year is usually worked out under section 102‑5.

 (2) If the capital loss year and the application year are the same, it must be the case that the gain company was not required to calculate its own *net capital gain or *net capital loss for the application year:

 (a) under Subdivision 165‑CB (because of a change in ownership or control); or

 (b) under section 175‑75 (because of an injected capital gain or loss).

Note: In deciding whether paragraph (b) applies, remember that the transferred amount is taken to be a capital loss of the gain company for the application year (because of subsection 170‑120(2)).

170‑145  Maximum amount that can be transferred

Loss company can only transfer what it cannot use itself

 (1) The amount transferred cannot exceed the amount of the loss company's *net capital loss that, apart from the transfer, the loss company would carry forward to the next income year after the application year.

Note: If the capital loss year and the application year are the same, the loss company would carry forward the whole of the net capital loss, because section 102‑5 does not allow a net capital loss to be applied in the income year in which it was made.

Example: In the application year the loss company has:

                 a net capital loss from an earlier income year of $25,000; and

                 other capital losses totalling $10,000; and

                 capital gains totalling $20,000;

 Of the $25,000 loss, the loss company can transfer to the gain company no more than:

Transferred loss must not exceed total cost bases of equity and debt interests in the loss company held by companies in the same wholly‑owned group

 (2) The amount transferred also cannot exceed the total of the respective *cost bases at the end of the application year (excluding indexation) of:

 (a) each *share in the loss company that is held at the end of the