Deducting tax loss: saving rule - loss transfer

In satisfying the conditions in subsection 170-35(3) of the Income Tax Assessment Act 1997 (ITAA 1997) concerning the eligibility of a loss company to transfer a tax loss, can the saving rule in subsection 165-12(7) of the ITAA 1997 be taken into account?

Yes. In determining whether a loss company would have been prevented from deducting the tax loss by Subdivision 165-A of the ITAA 1997, regard can be had to subsection 165-12(7) of the ITAA 1997.

Loss Company seeks to transfer a tax loss under Subdivision 170-A of the ITAA 1997 that it incurred in an earlier income year.

If Loss Company had enough assessable income, it would only have been able to deduct the loss if it had recourse to subsection 165-12(7) of the ITAA 1997, as otherwise it would not have satisfied the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of Subdivision 165-A of the ITAA 1997 due to section 165-165 of the ITAA 1997.

To transfer a tax loss under Subdivision 170-A of the ITAA 1997, subsection 170-35(3) requires that the Loss Company must not have been prevented by Subdivision 165-A of the ITAA 1997 from deducting the tax loss in the deduction year, if it had enough assessable income to offset the tax loss.

In applying subsection 170-35(3) of the ITAA 1997, it is irrelevant that the Loss Company would only have satisfied Subdivision 165-A of the ITAA 1997 because of the saving rule in subsection 165-12(7) of the ITAA 1997.