Commonwealth Consolidated Acts Commonwealth Consolidated ActsLoss company can only transfer what it cannot use itself
(1) The amount transferred cannot exceed what would be the amount of the * loss company's * unutilised * net capital loss at the end of the application year if the loss company utilised the net capital loss to the greatest extent possible.
Note: If the capital loss year and the application year are the same, the whole of the net capital loss would be unutilised, because section 102 - 5 does not allow a net capital loss to be applied in the income year in which it was made.
Example: In the application year the loss company has:
• a net capital loss from an earlier income year of $25,000; and
• other capital losses totalling $10,000; and
• capital gains totalling $20,000;
Of the $25,000 loss, the loss company can transfer to the gain company no more than:
Transferred loss must not exceed what the gain company can use
(5) No amount can be transferred if, apart from the operation of this section, the gain company would not have a * net capital gain for the application year.
(6) The amount transferred also cannot exceed the amount worked out as follows:
Method statement
Step 1. Work out what, apart from the operation of this section, would have been the gain company's * net capital gain for the application year.
Step 2. Subtract each amount that:
(a) the gain company can apply under section 170 - 115 in working out its * net capital gain for the application year; and
(b) was transferred to the gain company (by the loss company or any other company) by an agreement made before the agreement by which the first amount is transferred.
Example: In the application year:
• the gain company has capital gains totalling $60,000 and capital losses totalling $25,000; and
• another company, being a member of the same wholly - owned group as the gain company, transferred a net capital loss of $15,000 to the gain company; and
• the loss company incurred a net capital loss of $50,000.
Of the $50,000 loss, the loss company can transfer to the gain company no more than:
(7) Subsection (6) does not apply if the transfer occurs because either or both of the conditions in subsections 170 - 142(2) and (4) are met. In that case, the amount transferred also cannot exceed the amount worked out as follows:
Method statement
Step 1. Identify each * bundle of losses that, on the assumption in subsection 170 - 142(2) or (4) (as appropriate), would have included the * net capital loss.
Note 1: There will be 2 or more bundles of losses identified if both of the conditions in subsections 170 - 142(2) and (4) are met.
Note 2: There will be more than 1 bundle of losses identified on the basis of the assumption in paragraph 170 - 142(4) if the conditions in subsections 170 - 130(1) and (2) are met in relation to the loss company and the gain company because of multiple applications of section 170 - 133 each involving a different first link company.
Step 2. For each * bundle identified, work out how much of the * net capital loss the gain company would have been able to apply in working out its * net capital gain for the application year assuming that:
(a) the loss could have been applied in that year only after the application in that year of any other losses of that * sort that would have been included in the bundle, other than losses (the transferable losses ) that could be transferred from the * loss company to the gain company for that year; and
(b) if the bundle would have included 2 or more transferable losses of that sort--those losses could have been applied only in the order in which the loss company made them.
Note 1: If the assumption in subsection 170 - 142(2) is relevant to the bundle, it would have included losses made by the gain company and transferred (or taken to be transferred) to the company (from itself) under Subdivision 707 - A.
Note 2: If the assumption in paragraph 170 - 142(4) is relevant to the bundle, it would have included losses actually made by the first link company and transferred (by one or more transfers under Subdivision 707 - A) to the gain company.
Step 3. Total every result of step 2 for the * net capital loss.