Issue
Can a capital loss an individual taxpayer makes be transferred to a wholly-owned company under any provision of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. There is no provision in the ITAA 1997 which allows a capital loss made by an individual to be transferred to a wholly-owned company.
Facts
An individual taxpayer acquired a number of assets on or after 20 September 1985, which consisted of shares, trust units and other financial instruments, held for investment purposes.
The taxpayer has transferred some of those assets to a wholly-owned company.
The taxpayer has retained some of the investment assets, comprising shares in a company that is in liquidation. The taxpayer expects to make a capital loss and proposes to transfer the capital loss to the wholly-owned company.
Reasons for Decision
There is no provision in the ITAA 1997 that would allow the transfer of a capital loss from an individual to a wholly-owned company.
Capital losses that a taxpayer makes in an income year are offset against any capital gains made during the income year (section 102-5 of the ITAA 1997). If the capital losses are not absorbed in this way, they are carried forward to future income years, to be offset against future capital gains (subsection 102-15(3) of the ITAA 1997).