Document ID: chunk:federal_register_of_legislation:C2010C00615:clause:1_18:p2
Version: federal_register_of_legislation:C2010C00615
Segment Type: clause
Provision Reference: sch 1 cl 18 (pt 2/23)
Character Range: 25286–28003

have to calculate its unrealised losses.
      Unrealised losses on assets acquired for less than $10,000 do not have to be calculated at any time. In addition, an entity that (together with certain related entities) has a net asset value of under $5,000,000 does not have to count unrealised losses at an alteration time. This net asset value test is similar to the threshold for the small business CGT relief provisions.
      Amounts (whether realised or unrealised) counted at a previous alteration time are not counted again at a later alteration time. However, if unrealised amounts are not counted at a previous alteration time (for example, because of the $10,000 or small business entity exclusions) and are not required to be taken into account in adjustments made at that time, they may be counted at a later time as part of a realised loss.
      A formula is provided for the making of adjustments in straightforward cases where the application of the formula gives a reasonable result having regard to the object of the Subdivision. Otherwise, reasonable adjustments must be made having regard to a number of stated factors.
      To assist entities in making the required adjustments, any entity that, in its own right, has a controlling stake in a loss company is required to provide a written notice to its associates setting out relevant information. In limited circumstances, the loss company itself may have to provide a written notice to entities that, to its knowledge, have a significant equity or debt interest in the loss company.

165‑115H  How this Subdivision applies

 (1) This Subdivision provides for certain taxation consequences for an entity (not an individual) that had a significant equity or debt interest in a loss company immediately before an alteration time occurred in respect of the company.

 (2) The following flowchart explains how to work out whether this Subdivision applies to an entity.

 (3) If this Subdivision applies to an entity, reductions are made to:
 (a) the reduced cost base of the entity's equity or debt (see subsection 165‑115ZA(3)); or
 (b) any deduction to which the entity is entitled in respect of the disposal of the equity or debt (see subsection 165‑115ZA(4)); or
 (c)  deductions in respect of, and the cost of, any of the equity or debt that is trading stock (see subsection 165‑115ZA(5)).

Example: The following is an example of how this Subdivision operates:

Facts: Alpha Co acquired 80% of the shares in Beta Co on 5 May 1998 for $1,000.

 Gamma Co owns 20% of the shares in Beta Co.

 On 6 February 2000, Alpha Co disposed of its shares for $600.

 At the beginning of the 1999‑2000 income year, Beta Co had an unapplied net capital loss