Document ID: chunk:federal_register_of_legislation:C2010C00184:clause:1_5:p3
Version: federal_register_of_legislation:C2010C00184
Segment Type: clause
Provision Reference: sch 1 cl 5 (pt 3/4)
Character Range: 37599–40173

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 convertible foreign losses total less than or equal to $10,000 or choice made

  Section 770‑30 does not apply in relation to a tax loss an entity is taken by section 770‑1 to have if:
 (a) the amount worked out under section 770‑20 (the starting total) is less than or equal to $10,000; or
 (b) the entity chooses to reduce one or more tax losses the entity is taken by section 770‑1 to have had so that the starting total equals $10,000.

770‑20  Starting total for loss parcel

  The sum of the convertible foreign losses for each earlier year for which an entity is taken by section 770‑1 to have a tax loss is the starting total for all of those tax losses taken together (the loss parcel).

Example: On 1 July 2008, Loss Co determines that it has incurred the following overall foreign losses:
  *   Year ended 30 June 2002: $5,000 (with no amount of convertible foreign loss due to the operation of 770‑10);
  *   Year ended 30 June 2004: $4,000 (with an amount of $2,000 being a convertible foreign loss);
  *   Year ended 30 June 2005: $7,000 (with an amount of $3,000 being a convertible foreign loss);
  *   Year ended 30 June 2007: $8,000 (with the entire amount being a convertible foreign loss).

 Loss Co does not have any other domestic tax losses for those income years (that is, the 2002, 2004, 2005 and 2007 income years are not loss years).

 Initially, Loss Co's starting total for the loss parcel is $13,000, which consists of the tax losses incurred in the year ended 30 June 2004, the year ended 30 June 2005 and the year ended 30 June 2007 (there is no convertible foreign loss incurred in the year ended 30 June 2002 because of section 770‑1 and therefore there is no tax loss included in the loss parcel for that year). The 2004, 2005 and 2007 income years will then be a new loss year for Loss Co (under subsection 770‑1(2)), because Loss Co did not otherwise incur a tax loss in those years.

 To avoid the operation of the deduction limit (under section 770‑30), Loss Co chooses under paragraph 770‑15(b) to reduce the starting total for the loss parcel to $10,000 by not converting $3,000 of its convertible foreign losses (which consists of $2,000 of the 2004 tax loss and $1,000 of the 2005 tax loss). Consequently, only the 2005 and 2007 income years are the new