Document ID: chunk:federal_register_of_legislation:C2004C00958:clause:1_4:p2
Version: federal_register_of_legislation:C2004C00958
Segment Type: clause
Provision Reference: sch 1 cl 4 (pt 2/8)
Character Range: 568060–570675

loss company.

 (5) Neither company must be prevented by Subdivision 165‑CA or 175‑CA from applying the loss in working out its net capital gain for the income year of the transfer.

Note: 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.

 (6) The net capital loss is transferred by an agreement between the 2 companies.

 (7) The net capital loss can be transferred in the same year as it is made. In that case different rules apply.

Effect of transferring a net capital loss

170‑110  When a company can transfer a net capital loss

 (1) A company (the loss company) can transfer an amount of its *net capital loss for an income year (the capital loss year) to another company (the gain company) if the conditions in this Subdivision are met.

 (2) The amount transferred can be the whole or part of the *net capital loss.

Note: A PDF cannot transfer a net capital loss, except one for a period before it became a PDF: see section 195‑30 of the Income Tax Assessment Act 1997.

170‑115  Who can apply transferred loss

 (1) If an amount of a *net capital loss is transferred, the gain company can apply the amount in working out its *net capital gain, but only for the income year of the gain company for which the amount is transferred. That income year is called the application year.

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

 (2) The loss company can no longer apply the transferred amount and is taken not to have made the *net capital loss to the extent of that amount.

170‑120  Gain company is taken to have made transferred loss

 (1) If an amount of a *net capital loss is transferred, the amount is taken to be a *net capital loss of the gain company for the capital loss year.

 (2) However, if the capital loss year is the same as the application year, the amount is taken to be a *capital loss of the gain company for the application year.

170‑125  Tax treatment of consideration for transferred tax loss

 (1) If the loss company receives consideration from the gain company for the transferred amount:

 (a) the consideration is neither assessable income nor exempt income of the loss company; and

 (b) the loss company does not make a *capital gain because of receiving the consideration.

Note: However, the consideration may affect how section 170‑175 modifies the cost base of direct and indirect interests in the loss company.

 (2) If the gain company