Group company loss transfers: wholly-owned group - transfer agreement made prior to income company lodging its tax return

Will a loss transfer agreement between two companies in the same wholly-owned group be effective if the agreement is made subsequent to the loss company lodging its income tax return for the deduction year, but prior to the income company lodging its return for the same year?

Yes. Paragraph 170-50(2)(d) of the Income Tax Assessment Act 1997 (ITAA 1997) requires the agreement to be made on or before the day of lodgement of the income company's income tax return for the deduction year.

A loss company and an income company, both members of the same wholly-owned group, entered into an agreement to transfer a prior year tax loss. The agreement was made subsequent to the loss company lodging its income tax return for the deduction year. At the time of entering into the written agreement the income company had not yet lodged its income tax return for the deduction year.

Subdivision 170-A of the ITAA 1997 sets out the conditions for transfer of tax losses within wholly-owned groups of companies.

The condition in paragraph 170-50(2)(d) of the ITAA 1997 is that a written agreement must be made on or before the day of lodgement (as opposed to the due date for lodgement) of the income company's income tax return for the deduction year or within such further time as the Commissioner allows.

There is no requirement that the loss transfer agreement should be made before the loss company lodges its income tax return for the deduction year.