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Can the company that has incurred the 'excluded loss' in terms of section 175-5 of the Income Tax Assessment Act 1997 (ITAA 1997) be a 'person' for the purposes of section 175-15 of the ITAA 1997?

No. A 'person' for the purposes of section 175-15 of the ITAA 1997 means a person other than the company that incurred the 'excluded loss.'

Company S has a tax loss available to it from an earlier income year which it is now seeking to deduct.

Company S is a listed public company within Division 166 of the ITAA 1997.

Company X and Company Y collectively have more than 50% of the voting power in Company S and rights to more than 50% of the dividends and capital distributions of Company S at the start of the loss year.

Subsequently, Company X acquires beneficial ownership of a further parcel of shares in Company S from Company Y. Following this transaction, Company X alone has more than 50% of the voting power in Company S and rights to more than 50% of the dividends and capital distributions of Company S. Company Y continues to hold a minority percentage of the voting power in Company S and a minority percentage of the rights to the dividends and capital distributions of Company S.

The preceding transaction is the only trading in shares in Company S by either Company X or Company Y at any time during the test period within section 166-5 of the ITAA 1997.

Company S meets the conditions of section 165-12 of the ITAA 1997 as modified by Division 166.

Subsections 175-15(1) and 175-15(2) of the ITAA 1997 provide: Section 175-15 Second case: someone else obtains a tax benefit because of tax loss available to company 175-15(1) The Commissioner may disallow the *excluded loss if: (a) a person has obtained or will obtain a tax benefit in connection with a *scheme; and (b) the scheme would not have been entered into or carried out if the excluded loss had not been available to be taken into account for the purposes of: • Division 36 (which is about tax losses of earlier years); • Division 165 (which is about the income tax consequences of changing ownership or control of a company); • Subdivision 375-G (which is about film losses). 175-15(2) However, the Commissioner cannot disallow the *excluded loss if: (a) the person had a *shareholding interest in the company at some time during the income year; and (b) the Commissioner considers the tax benefit to be fair and reasonable having regard to that shareholding interest. *denotes a term defined in subsection 995-1(1) of the ITAA 1997

The heading of section 175-15 of the ITAA 1997 states that section 175-15 will apply where 'someone else' obtains a tax benefit because of a tax loss available to a company. The heading of section 175-15 forms part of the ITAA 1997 by virtue of subsection 950-100(1) of the ITAA 1997.

Subsection 175-15(2) of the ITAA 1997 provides that 'the person had a shareholding interest in the company'. Therefore the 'person' for the purposes of section 175-15 cannot be the company that is seeking to deduct a tax loss.

Accordingly the Commissioner may only disallow a tax loss under section 175-15 if a person other than the company that incurred the 'excluded loss', has obtained or will obtain a tax benefit in connection with a scheme, and that scheme would not have been entered into or carried out if the tax loss had not been available.