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INCOME TAX ASSESSMENT ACT 1997 - SECT 719.260

Special test for utilising a loss because a company maintains the same owners

Meeting the conditions in section 165- 12

             (1)  The focal company is taken to meet the conditions in section 165- 12 for the claim year and the loss if and only if the company (the test company ) identified in relation to the focal company in accordance with section 719- 265 would have met those conditions for that year on the relevant assumptions in:

                     (a)  section 719-270 (which is about assuming the test company made the loss for a particular income year); and

                     (b)  section 719- 275 (which is about assuming that nothing happened in relation to certain things that would affect whether the test company would meet those conditions); and

                     (c)  section 719-280 (which is about assuming that the test company would have failed to meet those conditions in certain circumstances).

Focal company's failure to meet conditions in section 165- 12

             (2)  The focal company is taken to fail to meet a condition in section 165- 12 only at:

                     (a)  the first time the test company would have failed to meet the condition on the relevant assumptions mentioned in subsection (1); or

                     (b)  the * test time described in subsection 166-5(6) for the test company, if:

                              (i)  Division 166 is relevant to working out whether the test company could have * utilised the loss for the claim year on the relevant assumptions mentioned in paragraphs (1)(a) and (b); and

                             (ii)  the test company is not assumed under section 719-280 to fail to meet the condition before the test time.

Note:          If the focal company is taken to fail to meet a condition in section 165- 12, the focal company will not be able to utilise the loss for the claim year unless the focal company meets the condition in section 165- 13 by satisfying the business continuity test. That test applies to the focal company (and not the test company).

Business continuity test for focal company under Division 166

             (3)  If subsection 166-5(5) affects whether the focal company can * utilise the loss for the claim year because the focal company is a * widely held company or an * eligible Division 166 company, or both, during the year, subsection 166-5(6) operates as if it required the * business continuity test to be applied to the * business the focal company carried on just before the time described in subsection (2) of this section.

Business continuity test for focal company to transfer loss

             (4)  If subsection 707-125(4) is relevant to working out whether the focal company can transfer the loss to a company under Subdivision 707-A, that subsection:

                     (a)  has effect as if subsection 707-125(5) described the focal company's income year containing the time at which the focal company is taken under subsection (2) of this section to fail to meet a condition in section 165- 12; and

                     (b)  has effect despite subsection (3) of this section.

Note:          For working out whether certain losses can be transferred under Subdivision 707-A, subsection 707-125(4) modifies the operation of subsection 166-5(6) by extending the business continuity test period to include the income year described in subsection 707-125(5).



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