Document ID: chunk:federal_register_of_legislation:C2010C00615:clause:1_18:p1
Version: federal_register_of_legislation:C2010C00615
Segment Type: clause
Provision Reference: sch 1 cl 18 (pt 1/23)
Character Range: 22779–25527

18  After Subdivision 165‑CC
Insert:

Subdivision 165‑CD—Reductions after alterations in ownership or control of loss company

Guide to Subdivision 165‑CD

165‑115G  What this Subdivision is about

      This Subdivision requires reductions and other adjustments (adjustments) to be made to the tax attributes of significant equity and debt interests (interests) that entities (affected entities) (not individuals) have in a company (a loss company) that has realised losses or unrealised losses, or both, if an event (an alteration time) of a particular kind occurs in respect of the loss company. The purpose of the reductions and other adjustments is to prevent multiple recognition of the company's losses when the interests are realised.
      An alteration time occurs in respect of the loss company when an alteration takes place in the control or ownership of the company. It also occurs if the liquidator of the loss company declares that shares in the company are worthless (CGT event G3). An alteration time is the trigger for the making of adjustments. Adjustments may also be made when an affected entity's interests in the loss company are partly realised within 12 months before an alteration time or where, under an arrangement, such interests are realised partly within that period or at the alteration time and partly at an earlier time.
      An affected entity is one that, alone or with its associates, has a controlling stake in the loss company and has either a direct or indirect equity interest of at least 10% in the loss company or is owed a debt of at least $10,000 by the loss company or by another entity that has a significant equity or debt interest in the loss company. However, entities in which there are no interests in respect of which a company's losses have been, or can be, duplicated are not affected by this Subdivision.
      Adjustments are made to the reduced cost base of the interests of an affected entity and also to deductions that relate to such interests if they are held as trading stock or otherwise on revenue account.
      The adjustments are based on the overall loss of the loss company. This amount comprises its realised losses and unrealised losses on CGT assets.
      Special rules, directed at saving compliance costs, apply to determine whether unrealised losses have to be counted at an alteration time. If that time is not also a changeover time for the purposes of Subdivision 165‑CC, and the company has no realised losses, it may not 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