Company Tax Losses: loss company during the test period was initially a 100% subsidiary of a listed public company, and then a listed public company itself - whether the former concessional tracing rules apply

Does the former Division 166 of the Income Tax Assessment Act 1997 (ITAA 1997) apply where, during the test period, the loss company was initially a 100% subsidiary of a listed public company, and then became a listed public company itself?

No. The loss company must either be a listed public company, or a 100% subsidiary of a listed public company, at all times during the test period in order for the former Division 166 of the ITAA 1997 to apply.

Company A has a tax loss for an earlier income year (the loss year) which it seeks to deduct in a later income year.

At the start of the loss year, company A was a 100% subsidiary of a listed public company (company B).

Subsequently, company A itself became a listed public company, and remained a listed public company until the end of the test period.

Note: Division 166 of the ITAA 1997 was significantly amended by the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005. The former Division 166 of the ITAA 1997 (former Division 166) applies to company A in accordance with item 170 of Schedule 1 to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act.

The former subsection 166-5(1) of the ITAA 1997 provided: 166-5(1) This Subdivision [Subdivision 166-A] modifies the way Subdivision 165-A applies to a company that is a * listed public company at all times during a period (the test period) consisting of the *loss year, the income year and any intervening period.

The former section 166-10 of the ITAA 1997 provided: 166-10(1) This Subdivision [Subdivision 166-A] also modifies the way Subdivision 165-A applies to a company that is not a *listed public company, but only if the conditions in subsections (2) and (3) are met.

Note: Subdivision 165-A is about the conditions a company must satisfy before it can deduct a tax loss for an earlier income year. 166-10(2) The company (the subsidiary) must be a *100% subsidiary of another company (the holding company) at all times during a period consisting of: (a) the *loss year of the subsidiary; and (b) the income year of the subsidiary; and (c) any intervening period. 166-10(3) Also, the holding company must be a *listed public company at all times during that period. 166-10(4) If the conditions are met then, for the purposes of applying Subdivision 165-A to the subsidiary, this Subdivision applies to the subsidiary as if: (a) the subsidiary were itself a *listed public company at all times during that period; and (b) an *abnormal trading in *shares in the holding company during that period were an abnormal trading in shares in the subsidiary. *Denotes a term defined in subsection 995-1(1) of the ITAA 1997

The former Division 166 of the ITAA 1997 would only apply if company A satisfied the conditions in either the former subsection 166-5(1) or the former subsections 166-10(2) and 166-10(3) of the ITAA 1997.

The former subsection 166-5(1) of the ITAA 1997 provided that Subdivision 166-A of the ITAA 1997 would apply where a company was a listed public company at all times during the test period.

The former subsection 166-10(2) of the ITAA 1997 provided that Subdivision 166-A of the ITAA 1997 would apply where a company was a 100% subsidiary of the same holding company at all times during the test period. In addition, the former subsection 166-10(3) of the ITAA 1997 provided that the holding company had to be a listed public company at all times during the test period.

Company A was not a listed public company, or a 100% subsidiary of the same listed public company, at all times during the test period.

Therefore, the former Division 166 of the ITAA 1997 does not apply to company A.