Issue
Can a valid written agreement be made under Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997) to transfer a tax loss where Income Company was in existence during the relevant loss year, but did not become a member of the same 'wholly owned group' as Loss Company until after the loss year?
Decision
No. Section 170-30 of the ITAA 1997 requires that Income Company must be a member of the same 'wholly-owned group' as Loss Company during not only the loss year but also the deduction year (and any intervening income year(s) if present).
Facts
Loss Company incurred a tax loss in the loss year.
Income Company was in existence at all times during the loss year. However it did not become a member of the same wholly-owned group as Loss Company until after the end of the loss year.
It is proposed that the tax loss incurred by Loss Company in the loss year be transferred to Income Company under Subdivision 170-A of the ITAA 1997 in respect of a later deduction year.
Reasons for Decision
Section 170-30 of the ITAA 1997 specifies the following conditions for the transfer of a tax loss under Subdivision 170-A of the ITAA 1997. (1) Both companies must be *in existence during at least part of each of the following income years: (a) The *loss year; and (b) *deduction year; and (c) any intervening income year. (2) Also, both companies must be members of the same *wholly-owned group during the whole or part of those income years when both companies were *in existence. Note: * denotes a term defined in section 995-1 of the ITAA 1997
Income Company was in existence at all times during the loss year. But it was not a member of the same 'wholly-owned group' with respect to the Loss Company at all times during the loss year. Therefore subsection 170-30(2) of the ITAA 1997 precludes the making of the proposed written agreement under Subdivision 170-A of the ITAA 1997.
Subdivision 170-A (sections 170-1 to 170-70) of the ITAA 1997 applies to assessments for the 1997-1998 income year and later income years.