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INCOME TAX ASSESSMENT ACT 1997 - SECT 170.215

Transfer of tax loss: direct and indirect interests in the income company

             (1)  If:

                     (a)  an amount of a * tax loss is transferred by a company to another company; and

                     (b)  Subdivision 170-A applies in respect of the transfer; and

                     (c)  a company (the group company ) holds a * share in the income company or is owed a debt by the income company in respect of a loan; and

                     (d)  the group company * acquired the share or debt on or after 20 September 1985; and

                     (e)  throughout the deduction year, the group company is a member of the same * wholly-owned group as the income company (disregarding a period when either was not in existence); and

                      (f)  a * CGT event happens in relation to the share or debt on or after the commencement of this section; and

                     (g)  the relevant agreement referred to in section 170-50 is made on or after that commencement; and

                     (h)  there are shares in, or debts owed by, the * loss company the * reduced cost base of at least one of which has been reduced by subsection 170-210(1) or (2);

the * cost base and * reduced cost base of the share or debt are increased in accordance with subsection (3).

             (2)  If:

                     (a)  an amount of a * tax loss is transferred by a company to another company; and

                     (b)  Subdivision 170-A applies in respect of the transfer; and

                     (c)  a company (the group company ) holds a * share in another company or is owed a debt by another company in respect of a loan; and

                     (d)  the group company * acquired the share or debt on or after 20 September 1985; and

                     (e)  the money that the group company paid for the share, or the borrowed money, has been applied (directly, or indirectly through one or more interposed entities):

                              (i)  in the other company or a third company acquiring shares in the income company; or

                             (ii)  in a * borrowing by the income company from the other company or from a third company; and

                      (f)  throughout the deduction year, the group company, the other company and the third company (if any) are all members of the same * wholly-owned group as the income company (disregarding, for a particular company, a period when it was not in existence); and

                     (g)  a * CGT event happens in relation to the share or debt on or after the commencement of this section; and

                     (h)  the relevant agreement referred to in section 170-50 is made on or after that commencement; and

                      (i)  there are shares in, or debts owed by, the * loss company the * reduced cost base of at least one of which has been reduced by subsection 170-210(1) or (2);

the * cost base and * reduced cost base of the share or debt are increased in accordance with subsection (3).

             (3)  The * cost base and * reduced cost base are increased by an amount that is appropriate having regard to:

                    (aa)  the matters mentioned in subsections 170-205(3) and (4); and

                   (ab)  the amounts of any reductions to the cost base and reduced cost base of * shares, and to the reduced cost base of debts, under subsection 170-210(3); and

                     (a)  the group company's direct or indirect interest in the income company; and

                     (b)  the amount of the loss transferred; and

                     (c)  any consideration given by the income company for the loss transferred.

Note:          This is because the consideration may be less than the commercial value of the loss transferred.

             (4)  However, the increase cannot exceed the increase in the * market value of the * share or debt that results from the transfer of the loss. (If no increase in that market value results, for example because the consideration paid for the transfer of the loss equals the commercial value of the loss transferred, then there is no increase in the * cost base and * reduced cost base.)

          (4A)  No increase is to be made to the extent that the * tax loss transferred does not represent an outlay or loss of any of the economic resources of the company that transferred the tax loss.

Note:          Where the income tax law allows, as all or part of a loss, an amount for the decline in value of a depreciating asset that exceeds the actual economic depreciation or depletion of the asset concerned, the excess is not to be regarded for the purposes of this subsection as representing an outlay or loss of economic resources of the company.

             (5)  Any increase is to be made immediately before a * CGT event happens in relation to the share or debt and is to have effect from that time or the end of the deduction year, whichever is the earlier.

Note:          This subsection is relevant for indexing elements of a cost base (see sections 114-1 and 114-15).

             (6)  No increase is to be made to the * cost base and * reduced cost base of a share or debt to the extent to which, because of a dividend or dividends paid by the income company, the increase in the * market value of the share or debt that resulted from the transfer of the loss is no longer in existence at the time when a * CGT event happens in relation to the share or debt.

Note:          For deduction year see subsection 170-20(1).



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