Conditions for choosing available fraction for value donor's loss
(1) This section has effect for the purposes of working out under Subdivision 707-C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if:
(a) the available fraction for a bundle of other losses is worked out, because of section 707-325, as if there were added to the modified market value of the real loss-maker of the other losses an amount worked out under that section by reference to the value donor's modified market value; and
(b) the loss was transferred under Subdivision 707-A of that Act at the initial transfer time from the value donor ; and
(c) the loss is not a loss whose utilisation is affected by section 707-350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and
(d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707-A of that Act at the initial transfer time had the company:
(i) made the loss for the income year for which the value donor made it; and
(ii) not utilised it; and
(e) the requirement in subsection (3) is met.
Note: This section has effect even if the amount added to the real loss-maker's modified market value under section 707-325 is nil because the value donor's modified market value is nil.
(2) This subsection covers:
(a) the real loss-maker; and
(b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707-325, as if there were added to the real loss-maker's modified market value an amount worked out by reference to the company.
(3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170-A or 170-B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707-328 had the conditions in that section existed.
Treating value donor's loss as included in bundle
(4) If the transferee mentioned in subsection 707-325(1) chooses, sections 707-310, 707-335 (except paragraph 707-335(2)(a)) and 707-340 of the Income Tax Assessment Act 1997 (and subsections 707-315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time:
(a) the bundle of losses included the loss; and
(b) the loss was not included in any other bundle of losses.
Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses.
Choice to treat value donor's loss as included in bundle
(5) A choice for the purposes of subsection (4):
(a) may be made only by the later of:
(i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707-350) losses transferred to it under Subdivision 707-A of the Income Tax Assessment Act 1997 ; and
(ii) the end of 31 December 2005; and
(b) cannot be revoked after 31 December 2005.
Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713-535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707-355 of this Act.
Loss already in bundle with increased available fraction
(6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707-325(1)(d) and (e) and subsection 707-325(2) in an application of section 707-325 separate from the application of that section mentioned in paragraph (1)(a) of this section.
Note: This means that a loss that provided a basis for section 707-325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses.