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Can a loss company transfer a tax loss under Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997) to a unit trust where both are wholly-owned by a holding company?

No. Subdivision 170-A of the ITAA 1997 only allows a tax loss to be transferred between companies within the same wholly-owned group. A unit trust is not a company, therefore no loss transfer is permitted.

A company ('the loss company') had a surplus tax loss in an income year ('the loss year'). A unit trust derived assessable income in the same income year. Both the loss company and the unit trust were wholly-owned by a holding company during the whole of that year.

Subsection 170-10(1) of the ITAA 1997 operates to allow a loss company to transfer an amount of its tax loss to another company within the 'same wholly-owned group' if the conditions for transfer in Subdivision 170-A of the ITAA 1997 are satisfied.

A company is defined in subsection 995-1(1) of the ITAA 1997 to mean (a) a body corporate or (b) any other unincorporated association or body of persons; but does not include a partnership.

A unit trust is neither a body corporate nor an unincorporated association. It does not fall within the definition of a company and, therefore, is ineligible to receive a loss transfer. The distinction between a unit trust and a company was highlighted by the High Court in Charles v Federal Commissioner of Taxation (1954) 90 CLR 598; 10 ATD 328.