Document ID: chunk:federal_register_of_legislation:C2010C00184:clause:1_5:p2
Version: federal_register_of_legislation:C2010C00184
Segment Type: clause
Provision Reference: sch 1 cl 5 (pt 2/4)
Character Range: 35126–37875

first income year starting on or after the first 1 July that occurs after the day on which the Tax Laws Amendment (2007 Measures No. 4) Act 2007 receives the Royal Assent (the commencement year); and
 (b) later income years.

770‑5  Convertible foreign loss

 (1) An entity has a loss to which this section applies (a convertible foreign loss) for an earlier income year covered by subsection (2) if:
 (a) the entity has incurred an overall foreign loss in respect of a class of assessable foreign income (within the meaning of former section 160AFD of the 1936 Act) for the earlier year, reduced to the extent that it has been taken into account under that former section in reducing the entity's assessable foreign income of the relevant class for an income year before the commencement year; and
 (b) a positive amount remains after reducing the overall foreign loss under section 770‑10.

Note 1: For the classes of income, see former subsection 160AFD(8) of the 1936 Act.

Note 2: There is a modification to this rule for losses transferred to a head company of a consolidated group: see subsection 770‑80(2).

Note 3: Former section 160AFD of the 1936 Act allowed a past foreign loss to reduce assessable foreign income of the same class.

 (2) The income year must be one of the most recent 10 income years ending before the commencement year.

 (3) The amount of the convertible foreign loss for the earlier year is the sum of the positive amounts remaining after each overall foreign loss in respect of a class of assessable foreign income for the earlier year is reduced under section 770‑10.

770‑10  Reducing the amount of an overall foreign loss of a class of assessable foreign income

  Apply the following method statement to each overall foreign loss in relation to a class of assessable foreign income of an earlier income year.

      Method statement
           Step 1. If the entity is a company and the relevant class of assessable foreign income is the "all other assessable income" class—reduce the amount applicable under paragraph 770‑5(1)(a) to the extent (if any) that the loss is attributable to losses or outgoings incurred in gaining or producing income of a kind that would be the company's non‑assessable non‑exempt income if it were gained or produced in the commencement year.
                  Note: For other entities, there is no reduction under step 1.
           Step 2. For income years other than the most recent 7 income years ending before the commencement year—reduce the result of step 1 by half.
                  Note: Step 2 is modified for losses transferred to a head company of a consolidated group: see subsection 770‑80(3).

Utilising transitional foreign losses

770‑15  No special rules if